Appeal Details
Counselvise Citation
40420314 RSA 2012
Assessee PAN
Bench
Appeal Number
CRN Number
Duration Of Justice
42 year(s) 11 month(s) 12 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
14-12-2012
Appeal Filed By
Department
Assessment Year
misc
Appeal Filed On
01-01-1970
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL, AGRA BENCH, AGRA BEFORE : SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND SHRI A.L. GEHLOT, ACCOUNTANT MEMBER ITA NO. 405 & 406/AGRA/2012 ASSTT. YEAR : 2007-08 & 2008-09 A.C.I.T., CENTRAL CIRCLE, VS. VACMET PACKAGING S (INDIA) PVT. LTD., AGRA. ANANT PLAZA, IIND FLOOR, CIVIL LINES, AGRA (PAN : AACCV 5120 B) ITA NO. 404/AGRA/2012 ASSTT. YEAR : 2006-07 A.C.I.T., CENTRAL CIRCLE, VS. VACMET FINANCE A ND INVESTMENTS LTD. AGRA. CIVIL LINES, CHURCH ROAD, AGRA. (PAN : AACCV 0905 C) (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI WASEEM ARSHAD, SR. D.R. RESPONDENT BY : SHRI PANKAJ GARGH, ADVOCATE DATE OF HEARING : 22.11.2012 DATE OF PRONOUNCEMENT OF ORDER : 14.12.2012 ORDER PER BHAVNESH SAINI, J.M.: THIS ORDER SHALL DISPOSE OF ALL THE APPEALS FILED BY THE REVENUE AGAINST DIFFERENT ORDERS OF LD. CIT(A)-II, AGRA. SAME ISSUE S ARE INVOLVED IN ALL THESE DEPARTMENTAL APPEALS AND THE PARTIES MAINLY ARGUED IN ITA NO. 405 & 406/AGRA/2012 AND STATED THAT THE ISSUE IS IDENTICA L IN ITA NO. 404/AGRA/2012. THEREFORE, THE ORDER IN THE CASES, IN WHICH BOTH TH E PARTIES ARGUED, MAY BE ITA NO. 404, 406 & 404/AGRA/2012 2 FOLLOWED IN OTHER CASE. WE, THEREFORE, TAKE UP ITA NO. 405 & 406/AGRA/2012 FOR THE PURPOSE OF DISPOSAL OF ALL THE DEPARTMENTAL APP EALS. 2. WE HAVE HEARD THE LD. REPRESENTATIVES OF BOTH TH E PARTIES AT LENGTH, PERUSED THE FINDINGS OF THE AUTHORITIES BELOW AND CONSIDERE D THE MATERIAL AVAILABLE ON RECORD. ITA NO. 405/AGRA/2012 (ASSESSMENT YEAR : 2007-08) : ITA NO. 406/AGRA/2012 (ASSESSMENT YEAR : 2008-09) : 3. BOTH THE DEPARTMENTAL APPEALS ARE FILED AGAINST THE COMMON ORDER OF LD. CIT(A)-II, AGRA DATED 15.05.2012 FOR THE ASSESSMENT YEARS 2007-08 AND 2008-09, CHALLENGING THE DELETION OF ADDITION OF RS.8,50,00, 000/- AND RS.5,00,00,000/- RESPECTIVELY MADE ON ACCOUNT OF UNEXPLAINED CASH CR EDITS U/S. 68 OF THE IT ACT. 4. THE AO HAS MADE FOLLOWING ADDITIONS IN ASSESSMEN T YEAR 2007-08 AND 2008- 09 ON ACCOUNT OF SHARE APPLICATION MONEY RECEIVED F ROM FOLLOWING COMPANIES HOLDING THEM TO BE NON-GENUINE : S.NO. NAME OF COMPANY WHO HAVE GIVEN ENTRY NAME OF COMPANY WHO HAVE TAKEN ENTRY PERIOD (A.Y.) AMOUNT 1. M/S. KMC PORTFOLIO (P) LTD. DELHI M/S. VACMET PACKAGING (INDIA)PVT. LTD., AGRA 2007-08 RS.8.5 CRORE 2. M/S. GANPATI FINCAP SERVICES (P) LTD., DELHI M/S. VACMET PACKAGING (INDIA)PVT. LTD., AGRA 2008-09 RS.5 CRORE ITA NO. 404, 406 & 404/AGRA/2012 3 5. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT A SEARCH & SEIZURE OPERATION WAS CONDUCTED BY THE DEPARTMENT ON THE ASSESSEE ON 26 TH OF MARCH, 2010. ALSO RELEVANT TO MENTION HERE IS THAT A SURVEY WAS CONDU CTED AT THE PREMISES OF ONE SHRI ASEEM GUPTA, CA ON 26 TH OF MARCH, 2010 AT DELHI. DURING THE COURSE OF STA TEMENT RECORDED DURING SURVEY, SHRI ASEEM GUPTA STATED THA T HE WAS INVOLVED IN PROVIDING BOGUS ACCOMMODATION ENTRIES IN THE GUISE OF SHARE A PPLICATION MONEY, PURCHASE / EXPENDITURE BY ISSUING THE CHEQUES AFTER OBTAINING EQUIVALENT CASH IN FAVOUR OF THE BENEFICIARIES. IN HIS STATEMENT RECORDED ON 26 TH OF MARCH, 2010 DURING THE COURSE OF SURVEY, SHRI ASEEM GUPTA DESCRIBED HIS MODUS OPE RANDI IN ANSWER TO QUESTION NO.18 AS UNDER: ANS: SUPPOSE THERE IS A COMPANY (A), WHICH IS HAVI NG CASH OF 10 LAC(RS.) AND WANT TO CONVERT THIS CASH IN WHITE MONEY. THE C OMPANY A THEN APPROACHES ITS CAS WHO ARE KNOWN TO ME AND ASK ME T O FURTHER ARRANGE FOR SHARE APPLICATION MONEY OF RS.10 LAC(RS.). THE CA O F THE COMPANY GENERALLY GET THE COMMISSION OF 0.50 PAISA IN 100 RUPEES. I FURTHER GET A COMMISSION OF 0.25 PAISA IN 100 RUPEES. I KNOW SEVERAL COMPAN IES WHOSE A/CS ARE AUDITED BY ME AND THEIR DIRECTORS ARE KNOWN TO ME. I IN TURN APPROACHES THESE COMPANIES AND THEIR DIRECTORS FOR ARRANGING S HARE APPLICATION MONEY. THESE COMPANIES FURTHER GET THE COMMISSION OF 0.25 PAISA IN 100 RUPEES. THE CASH OF 10 LAC RUPEES IS DEPOSITED IN THE BANK A/CS OF THESE COMPANIES WHICH ARE GIVING ACCOMMODATION ENTRIES. SOME TIMES THE CASH IS ALREADY LYING IN THE BANK ACCOUNT OF COMPANY PROVIDING ACCO MMODATION ENTRIES AND SOME TIME CHEQUES ARE ARRANGE THROUGH OTHER SOURCES ABOUT WHICH I DO NOT HAVE MUCH KNOWLEDGE. IN LIEU OF THAT THE COMPANY G IVING ACCOMMODATION ENTRIES JUST SAY CHEQUE OF RS.10 LAC TO COMPANY WHI CH NEEDS ACCOMMODATION ENTRIES. ITA NO. 404, 406 & 404/AGRA/2012 4 5.1 AS PER AO, SHRI ASEEM GUPTA IN HIS STATEMENT DATED 22 ND OF APRIL 2010 RECORDED BY THE ADIT(INTELLIGENCE)-III, NEW DELHI W HEN HE WAS CONFRONTED ANNEXURE NO.20 IMPOUNDED DURING THE COURSE OF SURVE Y ON 26 TH OF MARCH, 2010 WITH REGARD TO THE NOTINGS MADE ON THIS PAGE STATED AS UNDER: ANS: THESE ENTRIES PERTAIN TO VACMET PACKAGING (IN DIA) PVT. LTD. HAVING OFFICE ADDRESS AT ANANT PLAZA, II FLOOR, 4/117-2A, CIVIL LINES, CHURCH ROAD, AGRA 282002. THE EXPRESSION 10+90 MEANS SHARES O F FACE VALUE RS.10 PER SHARE HAVING SHARE PREMIUM AT RS.90 PER SHARE. IN T HE FIRST ENTRY 332711- 15/2/05-5000000, 332711 REFERS TO THE CHEQUE NO. OF MY COMPANY EITHER KMC PORTFOLIO PVT. LTD. OR GANPATI FINCAP SERVICES PVT. LTD., 15/02/05 REFERS TO THE DATE OF CHEQUE AND 5000000 REFERS TO THE AMOUNT OF SHARE APPLICATION MONEY GIVEN TO VACMET PACKAGING (INDIA) PVT. LTD. FOR 50000 SHARES OF FACE VALUE RS.10 PER SHARE HAVING SHARE P REMIUM AT RS.90 PER SHARE. ON THIS PAGE THERE ARE ENTRIES TOTALING RS. 500,00,000 (FIVE CRORES) I.E. MY COMPANIES EITHER KMC PORTFOLIO PVT. LTD. OR GANPATI FINCAP SERVICES PVT. LTD. HAVE GIVEN SHARE APPLICATION MON EY OF RS.5 CRORES TO VACMET PACKAGING (INDIA) PVT. LTD. FOR 5 LAKH SHARE S OF FACE VALUE OF RS.10 PER SHARE HAVING SHARE PREMIUM AT RS.90 PER SHARE. THE MODUS OPERANDI IS THAT ONE OF THE DIRECTORS OF VACMET PACKAGINGS (INDIA) PVT. LTD. ONE MR. AGARWAL APPROACHED ME TO ARRANGE SOME SHARE APPLICATION MONEY INTO HIS COMPANY I.E. VACMET PACK AGING (INDIA) PVT. LTD. IN LIEU OF CERTAIN COMMISSION THAT I WOULD EARN FOR ARRANGING SHARE APPLICATION MONEY IN HIS COMPANY SOME CASH AND CHEQ UES WERE GIVEN TO ME AND THIS CASH AND CHEQUES WERE DEPOSITED BY ME IN A CCOUNTS HELD IN THE NAME OF ABM TRADERS OR SURYA ENTERPRISES AND THEN T HIS MONEY WAS TRANSFERRED INTO COMPANIES MANAGED AND CONTROLLED B Y ME I.E. EITHER KMC PORTFOLIO PVT. LTD. OR GANPATI FINCAP SERVICES PVT. LTD. AND FROM KMC PORTFOLIO PVT. LTD. / GANPATI FINCAP SERVICES PVT. LTD. THE MONEY WAS INTRODUCED IN THE BOOKS OF ACCOUNT OF VACMET PACKAG ING (INDIA) PVT.LTD. IN FORM OF SHARE APPLICATION MONEY. THE TRANSACTION P ERTAIN TO FINANCIAL YEAR 2004-05 AND MORE SPECIFICALLY FEBRUARY 2005 AND MAR CH, 2005. ALONG WITH THIS I GAVE THE FOLLOWING DOCUMENTS TO MR. AGARWAL, DIRECTOR OF VACMET PACKAGING (INDIA) PVT. LTD.: I. RESOLUTION FOR INVESTMENT IN THE COMPANY IN FORM OF SHARE APPLICATION MONEY. ITA NO. 404, 406 & 404/AGRA/2012 5 II. CONFIRMATION REGARDING THE SUBSCRIPTION TO SHARE CA PITAL IN THE COMPANY AND IN THIS CASE VACMET PACKAGING (INDIA) P VT. LTD. III. SHARE APPLICATION FORM IV. TRANSFER DEED. THUS, THE AO CONCLUDED THAT AS SHRI ASEEM GUPTA HAD ADMITTED THAT HE WAS INDULGING IN PROVIDING ACCOMMODATION ENTRIES AND HE ALSO FURNISHED THE NAMES OF ALL THE BENEFICIARIES, HAS MADE THE ADDITION ON ACC OUNT OF SHARE CAPITAL RECEIVED FROM THE FOLLOWING PERSONS : S.N NAME OF COMPANY WHO HAVE GIVEN ENTRY NAME OF COMPANY WHO HAVE TAKEN ENTRY PERIOD (A.Y.) AMOUNT OF ACCOMMODATION ENTRY 1. M/S.KMC PORTFOLIO (P) LTD. DELHI M/S.VACMET PACKAGING (INDIA) PVT. LTD., AGRA 2007-08 RS.8.5 CRORE 2. M/S.GANPATI FINCAP SERVICES (P) LTD., DELHI M/S.VACMET PACKAGING (INDIA) PVT. LTD., AGRA 2008-09 RS.5 CRORE 5.2 THE AO HAS ALSO OBSERVED THAT STATEMENT OF ONE OF T HE DIRECTORS OF THE APPELLANT COMPANY SHRI D.C. AGARWAL WAS RECORDED ON 21 ST OF DECEMBER, 2011 AND HE WAS NOT EVEN ABLE TO EXPLAIN WHETHER THE COM PANY WAS MAINTAINING THE STATUTORY RECORDS REQUIRED AS PER LAW AND AS PER AO HE WAS ALSO NOT AWARE OF THE MINUTE BOOK OF THE COMPANY, DETAILS OF AGM MINUTES AND NAME OF MAJOR SHAREHOLDERS. THE AO HAS FURTHER NOTED THAT ON EXA MINATION OF COPY OF BANK ACCOUNTS, IT IS SEEN THAT OPENING BALANCE WAS VERY NOMINAL BEFORE THE AMOUNT DEPOSITED IN THE ACCOUNTS AND DEPOSITED AMOUNT WAS WITHDRAWN WITHIN THE SAME DAY OR WITHIN VERY SHORT PERIOD. AS PER THE AO, TH E ASSESSEE WAS ALSO NOT AWARE OF ITA NO. 404, 406 & 404/AGRA/2012 6 THE FINANCIAL CAPACITY OF THE COMPANY WHO SUBSCRIBE D FOR THE SHARES. THUS, THE AO BY RELYING ON THE STATEMENT OF SHRI ASEEM GUPTA AND THE APPRAISAL REPORT WHEREIN, AS PER THE AO, IT HAS BEEN CONCLUDED THAT THE AMOUN T OF RS.8.5 CRORE AND RS.5 CRORE CLAIMED TO HAVE BEEN RECEIVED DURING THE PERIOD REL EVANT TO A.Y. 2007-08 AND A.Y. 2008-09 RESPECTIVELY IN THE GUISE OF SHARE APPLICAT ION MONEY WERE ONLY ACCOMMODATION ENTRIES AND ACCORDINGLY HE MADE THE A DDITION OF RS.8.5 CRORE AND RS.5 CRORE IN A.Y. 2007-08 AND A.Y. 2008-09 RESPECT IVELY. THE AO ALSO RELIED ON THE CONTENTS OF THE BLACK DIARY WHICH WAS CONFRONTE D TO SHRI ASEEM GUPTA DURING THE COURSE OF STATEMENT ON 22 ND OF APRIL 2010 BY ADIT (INTELLIGENCE)-III, NEW DELHI AND WHEREIN HE HAS STATED THAT ALL THESE ENTR IES PERTAIN TO M/S.VACMET PACKAGING (INDIA) PVT. LTD. IT WAS FURTHER ELABORA TED BY HIM THAT 50,000 SHARES OF FACE VALUE OF RS.10 PER SHARE WERE SOLD AT A PREMIU M OF RS.90 PER SHARE. 6. THE ADDITION WAS CHALLENGED BEFORE THE LD. CIT(A ) AND DURING THE COURSE OF APPEAL PROCEEDINGS, THE LD. COUNSEL FOR THE ASSESSE E FILED HIS WRITTEN SUBMISSIONS ON 29.03.2012. THE WRITTEN SUBMISSIONS FILED BY TH E ASSESSEE WERE GIVEN TO THE AO FOR HIS COMMENTS. THE AO WAS ALSO DIRECTED TO C ONFRONT THE ASSESSEE THE CONTENTS OF THE BLACK DIARY ON WHICH RELIANCE HAS B EEN PLACED IN THE ASSESSMENT ORDER. ALSO ON THE SAME DAY AS IT WAS CONTENDED BY THE LD. COUNSEL FOR THE ASSESSEE THAT COPY OF STATEMENT OF SHRI ASEEM GUPTA ON WHICH RELIANCE HAD BEEN ITA NO. 404, 406 & 404/AGRA/2012 7 PLACED BY THE AO HAS NOT BEEN PROVIDED TO THE ASSES SEE, THE AO WAS DIRECTED TO PROVIDE THE SAME TO THE ASSESSEE. THE AO WAS FURTH ER DIRECTED THAT IF THE ASSESSEE COMES OUT WITH THE PLEA THAT OPPORTUNITY OF CROSS E XAMINATION OF SHRI ASEEM GUPTA SHOULD BE ALLOWED TO IT THEN THE SAME SHOULD BE PROVIDED TO THE ASSESSEE AS THE ASSESSEE EVEN DURING THE ASSESSMENT STAGE HAD B EEN PRESSING FOR CROSS EXAMINATION OF SHRI ASEEM GUPTA. AS THE SUBMISSION S MADE BY THE LD. AR FOR BOTH THE YEARS ARE IDENTICAL EXCEPT THE AMOUNTS AND NAMES OF THE COMPANIES DIFFER FROM WHERE THE SHARE APPLICATION MONEY HAS BEEN REC EIVED, THUS, TO AVOID DUPLICATION, SUBMISSIONS MADE FOR THE ASSESSMENT YE AR 2007-08 REPRESENTING AS TO WHAT THE ASSESSEE HAS TO SAY IN SUPPORT OF THE GROU NDS OF APPEAL FOR BOTH THE YEARS ARE REPRODUCED IN APPELLATE ORDER AS UNDER: 4.1 THAT SHARE APPLICATION MONEY OF RS. 8,50,00,000 /- RECEIVED DURING THE ASSESSMENT YEAR 2007- FROM M/S KMC PORTF OLIO (P) LTD, DELHI HAS BEEN ADDED BY THE ASSESSING OFFICER U/S 6 8 OF THE ACT TREATING THE INCREASE IN SHARE CAPITAL AS UNEXPLAIN ED INVESTMENT FOR THE REASONS AS MENTIONED IN THE ASSESSMENT ORDER. 4.2 THAT ON PERUSAL OF THE ASSESSMENT ORDER IT SEEM S THAT THE ASSESSING OFFICER HAS MADE THE ADDITION MAINLY FOR THE FOLLOWING REASONS:- I) ON THE BASIS OF THE STATEMENT OF THE PERSON NAME D SHRI ASEEM GUPTA CA DURING THE COURSE OF SURVEY PROCEEDI NGS CARRIED OUT IN HIS OFFICE U/S 133A OF THE ACT. II) BLACK DAIRY FOUND AND IMPOUNDED FROM THE OFFICE OF SHRI ASEEM GUPTA CA ITA NO. 404, 406 & 404/AGRA/2012 8 III) ASSESSEE FAILED TO PROVE THE CREDIT EVIDENCE A ND THE GENUINENESS OF THE COMPANY FROM WHOM THE AMOUNT HAS BEEN RECEIVED AS SHARE APPLICATION MONEY. 4.3 THAT TO OVERCOME WITH THE OBSERVATION OF THE AS SESSING OFFICER IT IS VERY IMPORTANT TO BRING THE FACTS OF THE CASE BEFORE YOUR GOODSELF, THE QUERIES MADE BY THE ASSESSING OFFICER, THE SUBM ISSION AND THE DOCUMENTS PLACED BEFORE THE ASSESSING OFFICER DURIN G THE COURSE OF ASSESSMENT PROCEEDINGS U/S 153A OF THE ACT. I) THE FIRST NOTICE U/S 142(1) OF THE ACT DATED 18. 07.2011 IN THE NAME OF M/S VACMET INDIA LTD WAS RECEIVED, COPY ENCLOSED, VIDE WHICH QUERY AT S. NO. 12 THE APPELLANT COMPANY WAS ASKED TO FURNISH THE DETAILS OF SHARE CAPITAL RECEIVED DU RING THE YEAR. IN THE SAME NOTICE VIDE QUERY AT. S. NO. 20 & 21 TH E ASSESSEE WAS ASKED ABOUT THE RELATIONSHIP WITH SHRI ASEEM GU PTA CA. AFTER DROPPING OF THE PROCEEDINGS IN THE NAME OF M/ S VACMET INDIA LTD FOR ASSESSMENT YEAR 2004-05 TO 2009-10 AN OTHER NOTICE U/S 142(1) OF THE ACT DATED 02.11.2011 WAS I SSUED IN THE NAME OF ASSESSEE COMPANY HAVING ALMOST THE SIMILAR QUERIES. II) IN RESPONSE TO THESE NOTICES WRITTEN SUBMISSION DATED 16.11.2011 WAS FILED GIVING THE DETAILS OF INCREASE IN SHARE CAPITAL RECEIVED DURING THE YEAR ALONGWITH CONFIRMA TION FROM THE SUBSCRIBER COMPANIES. COPY ENCLOSED. IN THIS SU BMISSION FOR THE QUERY MADE BY ASSESSING OFFICER AS REGARDS RELATIONSHIP WITH SHRI ASEEM GUPTA CA IT WAS SUBMITTED VIDE PARA 20 -21 OF THE SUBMISSION:- THE ASSESSEE COMPANY HAS NEITHER ANY RELATIONSHIP WITH THE PERSON NOR ANY TRANSACTIONS WITH PERSON NAMELY SHR I ASEEM KUMAR GUPTA, CHARTERED ACCOUNTANT WHO IS SAID BY YO UR GOODSELF TO BE THE PARTNER OF M/S AGARWAL VISHWANAT H & ASSOCIATES . THE ASSESSEE COMPANY DOES NOT KNOW ANY SUCH FIRM NAMED IN THE QUESTIONNAIRE AS M/S AGARWAL VISHWANA TH & ASSOCIATES. DIRECTORS OF ASSESSEE COMPANY DO NOT K NOW SHRI ASEEM KUMAR GUPTA, CHARTERED ACCOUNTANT AND QUESTIO N OF ANY MEETING WITH THIS PERSON DOES NOT ARISE. ITA NO. 404, 406 & 404/AGRA/2012 9 III) THAT IMMEDIATELY AFTER FILING THE WRITTEN SU BMISSION DATED 16.11.2011 ANOTHER WRITTEN SUBMISSION DATED 2 3.11.2011 WAS FILED SUO-MOTO IN CONTINUATION OF THE EARLIER S UBMISSION GIVING THEREIN THE DETAIL OF THE DOCUMENT RECEIVED FROM THE SUBSCRIBER COMPANIES. COPY OF THE FOLLOWING DETAILS /DOCUMENTS WERE FILED BEFORE THE ASSESSING OFFICER:- A) CONFIRMATORY LETTER GIVING THE DETAILS OF NUMBER OF SHARES APPLIED, DETAILS OF BANK ACCOUNT FROM WHERE THE CHEQUES WERE ISSUED, THE AMOUNT PAID TOWARDS SHARE APPLICAT ION AND THE PAN TO PROVE THE IDENTITY. B) COPY OF THE BOARD RESOLUTION OF THE SHARE APPLICANT S. C) COPIES OF SHARE APPLICATION FORMS RECEIVED FROM THE SHARE APPLICANTS. D) PHOTOSTATE COPIES OF THE RELEVANT PAGES OF THE BANK STATEMENTS FROM WHERE THE CHEQUES WERE ISSUED TO PR OVE THE GENUINENESS OF THE TRANSACTION. E) PHOTOSTATE COPIES OF THE AUDITED BALANCE SHEETS OF THE APPLICANT COMPANIES TO PROVE THEIR CREDIT WORTHINES S BY WAY OF PROVING THEIR NET WORTH. F) PHOTOCOPIES OF THE SHARE CERTIFICATES ISSUED BY THE ASSESSEE COMPANY TO THE SHARE APPLICANTS. THE ABOVE NAMED COMPANY IS REGULARLY ASSESSED TO TA X AND ALL THE TRANSACTIONS ARE THROUGH BANKING CHANNEL. COPY OF THE SAME ARE AGAIN ENCLOSED FOR READY REFERENCE. IV) IT IS IMPORTANT TO MENTION HERE THAT THESE DOCU MENTS WERE FILED BEFORE THE ASSESSING OFFICER THOUGH THE SAME WERE NOT SPECIFICALLY ASKED FOR AT ANY POINT OF TIME BETWEEN THE ISSUE OF FIRST NOTICE U/S 142(1) OF THE ACT DATED 18.07.2011 TILL 23.11.2011 ITA NO. 404, 406 & 404/AGRA/2012 10 V) IT IS ALSO IMPORTANT TO MENTION HERE THAT WHILE CONCLUDING THE WRITTEN REPLY DATED 23.11.2011 IT WAS SPECIFICA LLY SUBMITTED THAT BY FILING ALL THE DOCUMENTS, THE ONUS LYING ON THE ASSESSEE COMPANY STANDS FULLY DISCHARGED. SPECIFIC REQUEST W AS ALSO MADE THAT IF ANY FURTHER INFORMATION/DOCUMENT/EXPLANATION/PAPER WAS STILL RE QUIRED KINDLY LET THE ASSESSEE COMPANY KNOW SO THE SAME CA N BE FILED. 4.4 THAT NUMBER OF CASES OF THE ASSESSEE COMPANY AN D ITS DIRECTORS WERE IN THE COURSE OF ASSESSMENT U/S 153A OF THE AC T AND IN THE MONTH OF NOVEMBER AND DECEMBER 2011 THE AUTHORIZE REPRESE NTATIVE OF THE ASSESSEE COMPANY ATTENDED ALMOST DAILY THE OFFICE O F THE ASSESSING OFFICER. AFTER FILING THE WRITTEN SUBMISSION DATED 23.11.2011 NO FURTHER QUERY WAS MADE BY THE ASSESSING OFFICER AS REGARDS THE INCREASE IN SHARE CAPITAL. 4.5 THAT VIDE ORDER SHEET ENTRY DATED 13.12.2011 TH E ASSESSEE COMPANY WAS ASKED TO FURNISH CERTAIN QUERIES IN RES PECT TO SHARE APPLICANT NAMELY M/S GANPATI FINCAP SERVICES (P) LT D FOR RS. 5,00,00,000/- RECEIVED AS SHARE CAPITAL IN A.Y. 200 8-09 AND M/S KMC PORTFOLIO (P) LTD FOR RS. 8,50,00,000/- RECEIVED A S SHARE CAPITAL IN A.Y. 2007-08 TO ESTABLISH/SUBSTANTIATE THE GENUINEN ESS OF THESE CREDITS WITH REFERENCE TO CREDIBLE SUPPORTING EVIDENCE. THE ASSESSEE COMPANY WAS FURTHER REQUIRED TO FURNISH THE FOLLOWING BY 19 .12.2011 :- A) COMPLETE DETAILS OF THE DIRECTORS / KEY PERSONS OF THESE TWO COMPANIES SUBSCRIBING THE SHARE CAPITAL OF THE ASSE SSEE COMPANY B) TO EXPLAIN AS TO HOW THE SHARE APPLICATION FORMS WE RE RECEIVED ALONG WITH SUPPORTING EVIDENCE. C) STATUTORY RECORDS REGISTER OF SHAREHOLDERS, MINUT E BOOKS OF THE AGM OF THE ASSESSEE COMPANY ALONG WITH DETAILS IN RESPECT OF THE PERSONS WHO REPRESENTED THESE INVESTING COMP ANIES D) CLARIFICATION WHETHER SHRI RAJAN GUPTA CA, SHRI RAJ ESH GUPTA CA, SHRI SUNIL KANSAL CA AND SHRI S. K. JAIN CA WER E KNOWN TO THE ASSESSEE COMPANY . 4.6 THAT IN RESPONSE TO ORDER SHEET ENTRY DATED 13. 12.2011 A DETAILED WRITTEN SUBMISSION WAS FILED ON 19.12.2011 MAKING SUBMISSION ON THE DETAILS AS REQUIRED VIDE ORDER SH EET ENTRY DATED ITA NO. 404, 406 & 404/AGRA/2012 11 13.12.2011 COVERING ALL THE ASPECTS WITH REGARD TO THE DOCUMENT FILED FROM TIME TO TIME. IN ADDITION TO THE DOCUMENTS ALR EADY FILED, FOLLOWING PAPER/DOCUMENTS WERE ALSO FILED VIDE WRIT TEN SUBMISSION DATED 19.12.2011:- I) COPY OF SHARE APPLICATION ACCOUNT OF THE ASSESSEE COMPANY. II) COPY OF SHARE CAPITAL ACCOUNT OF THE ASSESSEE COMPA NY. III) COPY OF RETURNS OF ALLOTMENT (FORM NO. 2) FILED BY THE ASSESSEE COMPANY IN TERMS OF THE PROVISIONS OF THE COMPANIES, ACT 1956 ALONGWITH THE LIST OF ALLOTTEES . 4.7 IN THIS REPLY, SPECIFIC SUBMISSIONS WERE MADE T O PROVE THE BASIC INGREDIENTS OF SECTION 68 OF THE ACT NAMELY IDENTIT Y / EXISTENCE OF THE DEPOSITORS, THEIR CREDITWORTHYNESS AND CAPACITY AND GENUINENESS OF THE TRANSACTION. EVEN, THE ATTENTION OF THE ASSESSI NG OFFICER WAS ALSO DRAWN TOWARDS THE CASE LAW DECIDED BY THE APEX COUR T IN THE CASE OF CIT VS. LOVELY EXPORTS PVT. LTD. REPORTED IN (2008) 216 CTR 195. 4.8 THAT WHILE CONCLUDING THE WRITTEN SUBMISSION DA TED 19.12.2011 THE ASSESSEE COMPANY VIDE PARA 10 POINTED OUT BEFOR E THE ASSESSING OFFICER THAT NO INCRIMINATING DOCUMENT WAS EITHER F OUND OR IMPOUNDED OR SEIZED DURING THE COURSE OF SEARCH AND SEIZURE OPERATIONS CONDUCTED AT THE BUSINESS AND RESIDENTIA L PREMISES OF THE ASSESSEE COMPANY AND ITS DIRECTORS IN RESPECT OF IN CREASE IN SHARE CAPITAL. SIMULTANEOUSLY, SPECIFIC REQUEST WAS AGAIN MADE TO CONFRONT THE ADVERSE MATERIAL, IF ANY, IN THE POSSESSION OF ASSESSING OFFICER SO AS TO ENABLE THE ASSESSEE COMPANY TO REBUT THE SAME . IT WAS ALSO REQUESTED THAT IN CASE THE ASSESSING OFFICER IS IN POSSESSION OF ANY STATEMENT OF ANY OTHER PERSON, THE SAME MAY KINDLY BE CONFRONTED ALLOWING AN OPPORTUNITY OF CROSS EXAMINING THE SAID PERSON / WITNESS. ALL THESE REQUESTS WERE MADE IN VIEW OF THE PRINCIP LE OF NATURAL JUSTICE. 4.9 THAT VIDE ORDER SHEET ENTRY DATED 13.12.2011 AP ART FROM THE DETAIL AS REQUIRED BY THE ASSESSING OFFICER, THE AS SESSEE COMPANY WAS ASKED TO PRODUCE THE DIRECTOR OF THE ASSESSEE COMPA NY NAMELY SHRI DINESH CHAND AGARWAL FOR EXAMINATION ON 19.12.2011. ON 19.12.2011 VIDE ORDER SHEET ENTRY SHRI DINESH CHAND AGARWAL WAS REQUIRED TO BE PRODUCED FOR STATEMENT ON 21.12.2011 ON WHICH DATE ITA NO. 404, 406 & 404/AGRA/2012 12 SHRI DINESH CHAND AGARWAL ATTENDED THE OFFICE OF TH E ASSESSING OFFICER AND HIS STATEMENT WAS RECORDED ON OATH. COP Y OF STATEMENT RECORDED IS ENCLOSED. ON PERUSAL OF THE STATEMENT Y OUR GOODSELF WILL FIND THAT WHEN IT WAS ASKED REGARDING SHRI ASEEM GU PTA CA IT WAS SPECIFICALLY STATED BY SHRI DINESH CHAND AGARWAL TH AT ENQUIRIES WITH REGARD TO SOME MR. ASEEM GUPTA ARE BEING MADE TIME AND AGAIN NOT ONLY IN THIS STATEMENT BUT ALSO ON EARLIER OCCASION S AND THEREFORE, ASSESSING OFFICER WAS SPECIFICALLY REQUESTED TO PRO DUCE SHRI ASEEM GUPTA FOR MY CROSS EXAMINATION IN CASE HE HAS GIVEN ANY WRONG INFORMATION IN RESPECT OF ME OR MY COMPANIES IN ANY MANNER WHATSOEVER. 4.10 THAT WRITTEN SUBMISSION DATED 27.12.2011 WAS A LSO SUBMITTED BEFORE ASSESSING OFFICER AND AS PER HIS VERBAL DIRE CTIONS THE SAME WAS FILED IN DAK ON 29.12.2011 WHICH HAS BEEN TAKEN BY THE ASSESSING OFFICER ON RECORD AS PER ORDER SHEET ENTRY DATED 29 .12.2011 WHICH IS BEFORE THE COMPLETION OF ASSESSMENT. 4.11 THAT THE ASSESSING OFFICER BRUSHING ASIDE THE DOCUMENT FILED FROM TIME TO TIME AND REJECTING THE APPELLANTS SUB MISSION MADE THE ADDITION OF THE AMOUNT OF RS. 8,50,00,000/- RECEIVE D FROM M/S KMC PORTFOLIO (P) LTD AS SHARE CAPITAL U/S 68 OF THE AC T TREATING THE SAME TO BE UNEXPLAINED INVESTMENT. 4.12 FURTHER SUBMISSION BEFORE YOUR HONOUR:- I) THAT THE ASSESSMENT OF SISTER CONCERN OF THE APP ELLANT COMPANY NAMELY M/S VACMET FINANCE & INVESTMENT LTD FOR A.Y. 2006-07 WAS COMPLETED U/S 143(3) OF THE ACT. IN THAT YEAR ALSO M/S VACMET FINANCE & INVESTMENT LTD RECEIVED SHARE CAPITAL FROM M/S KM C PORTFOLIO SERVICES (P) LTD AMOUNTING TO RS. 3,10,00,000/- DUR ING THE COURSE OF REGULAR SCRUTINY ASSESSMENT PROCEEDINGS DETAILED ENQUIRY/INVESTIGATION WAS MADE BY THE ASSESSING OFF ICER, CIRCLE 4(1), AGRA AS REGARDS THE SHARE CAPITAL RECEIVED FROM M/S KMC PORTFOLIO SERVICES (P) LTD. DURING THE COURSE OF ASSESSMENT P ROCEEDINGS, THE DOCUMENTS, TO DISCHARGE THE ONUS WHICH LAY UPON THE ASSESSEE, IN THE FORM OF CONFIRMATION, BALANCE SHEET, COPY OF ACKNOW LEDGMENT OF THE INCOME TAX RETURN, BANK STATEMENT ETC. WERE FILED. THE ASSESSING OFFICER FURTHER MADE DIRECT AND INDEPENDENT ENQUIRY BY SENDING ITA NO. 404, 406 & 404/AGRA/2012 13 NOTICE U/S 133(6) OF THE ACT TO THE SUBSCRIBER COMP ANY CALLING FOR THE INFORMATION. THE SAID NOTICE WAS DULY RESPONDED BY THE SUBSCRIBER COMPANY BY SENDING THE REQUIRED INFORMATION. THE AS SESSING OFFICER FURTHER ISSUED SUMMON U/S 131 OF THE ACT TO THE SUB SCRIBER COMPANY FOR THE PERSONAL ATTENDANCE OF THE DIRECTOR. THE DI RECTOR OF THE SUBSCRIBER COMPANY APPEARED BEFORE THE ASSESSING OF FICER ALONGWITH THE BOOKS OF ACCOUNT AND HIS STATEMENT ON OATH WAS RECORDED IN WHICH HE ADMITTED TO HAVE INVESTED IN THE SHARES OF VACME T FINANCE & INVESTMENT LTD. IN HIS STATEMENT HE ALSO STATED THE REASON FOR MAKING INVESTMENT IN SHARES. THE TRANSACTIONS WAS DULY GOT VERIFIED BY THE ASSESSING OFFICER AS THE DIRECTOR FILED COPY OF LED GER ACCOUNT OF VACMET FINANCE & INVESTMENT LTD AS APPEARING IN THE IR BOOKS OF ACCOUNTS. AFTER MAKING ALL THESE ENQUIRES THE ASSES SING OFFICER BEING SATISFIED WITH THE IDENTITY, GENUINENESS OF THE TRA NSACTION AND THE CREDITWORTHINESS, ACCEPTED THE SHARE CAPITAL AS GEN UINE/EXPLAINED. THE PERSONAL ATTENDANCE OF THE DIRECTOR WAS NOTED B Y THE ASSESSING OFFICER IN THE ORDER SHEET. COPY OF THE SAME IS ENC LOSED WHICH WAS OBTAINED AFTER INSPECTION OF THE ASSESSMENT FILE. II) THAT SINCE THE SHARE CAPITAL RECEIVED FROM M/S KMC PORTFOLIO (P) LTD HAS ALREADY BEEN ACCEPTED IN THE CASE OF SI STER CONCERN M/S VACMET FINANCE & INVESTMENT LTD IN SCRUTINY ASSESSM ENT FOR A.Y. 2006-07 THEREFORE THERE IS NO REASON FOR ANY DEPART URE FROM SUCH ACCEPTANCE IN THE ABSENCE OF ANY CONTRARY EVIDENCE ON RECORD. III) THAT IN THE PRESENT CASE ALSO DURING THE COURS E OF ASSESSMENT PROCEEDINGS U/S 153A OF THE ACT, THE ASSESSING OFFI CER MADE DIRECT AND INDEPENDENT ENQUIRY FROM M/S KMC PORTFOLIO (P) LTD BY ISSUE OF NOTICE U/S 133(6) OF THE ACT WHICH HAVE BEEN DULY R ESPONDED BY THE SUBSCRIBER COMPANY AND THE REQUIRED DETAILS/DOCUMEN TS IN THE FORM OF CONFIRMATION GIVING THE DETAILS OF CHEQUE NUMBER, A MOUNT AND THE NAME OF THE BANK ON WHICH THE CHEQUE WAS DRAWN, SHA RE RECEIVED CONFIRMATION, BANK STATEMENT, COPY OF SHARE CERTIFI CATES, INCOME TAX RETURN, BALANCE SHEET WERE DIRECTLY SENT TO THE ASS ESSING OFFICER . COPY OF THE SAME ARE ENCLOSED FOR READY REFERENCE O F YOUR GOODSELF. THE SAME HAS BEEN OBTAINED ON INSPECTION OF THE ASS ESSMENT FILE ON 21.03.2012. (IV) RE: STATEMENT OF ASEEM GUPTA [C.A.] ITA NO. 404, 406 & 404/AGRA/2012 14 ON PERUSAL OF THE ASSESSMENT ORDER IT SEEMS THAT T HE ADDITION HAS BEEN MADE BY THE ASSESSING OFFICER SIMPLY RELYING O N THE STATEMENT OF MR. ASEEM GUPTA CA FORWARDED TO THE ASSESSING OFFIC ER BY THE DEPARTMENT CARRIED OUT SURVEY. IN THIS REGARD THE A PPELLANT WISH TO SUBMIT AS UNDER:- A) THAT ON ENQUIRY FROM THE SUBSCRIBER COMPANY M/S KMC PORTFOLIO (P) LTD IT HAS BEEN INFORMED THAT THE PER SON NAMED MR. ASEEM GUPTA HAS NEVER BEEN THE DIRECTOR OF THE SAID COMPANY. B) THAT ON INSPECTION OF THE ASSESSMENT FILE, THE I MPORTANT FACT WHICH COME IN THE KNOWLEDGE OF THE ASSESSEE COMPANY IS THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER ISSUED NOTICE U/S 133(6) OF THE ACT TO SHRI ASEEM GUPTA IN RESPONSE TO WHICH HE SENT HIS SUBMISSION STATING THAT I HAVE NOT DON E ANY SHARE TRANSACTION AS REGARDS PURCHASE AND SALE DURING THE CAPTION ASSESSMENT YEAR WITH THE COMPANY M/S VACMET PACKAGI NG (INDIA) PVT. LTD. COPY OF THE NOTICE AND OF LETTER DATED 29.11. 2011 SENT BY SHRI ASEEM GUPTA IS ENCLOSED FOR REFERENCE. C) THAT DURING THE COURSE OF SEARCH PROCEEDINGS STA TEMENT ON OATH OF THE MANAGING DIRECTOR SHRI DINESH CHAND AGARWAL WAS RECORDED BY THE OFFICERS OF SEARCH TEAM IN WHICH IT WAS ASKE D THAT WHETHER YOU KNOW MR. ASEEM GUPTA CA OR NOT. IN REPLY SHRI D.C. AGARWAL CLEARLY STATED THAT HE DOES NOT KNOW ANY PERSON NAMED MR. A SEEM GUPTA. AGAIN IN THE VERY FIRST NOTICE ISSUED U/S 142(1) OF THE ACT, AS MENTIONED ABOVE, VIDE QUERY AT S. NO. 20-21 IT WAS ASKED WHAT IS YOUR RELATION WITH SHRI ASEEM GUPTA CA AND PARTNER OF M/S AGARWAL VISHWANATH & ASSOCIATES. IN RESPONSE TO THE SAME IT WAS SUBMITTED :- THE ASSESSEE COMPANY HAS NEITHER ANY RELATIONSHIP WITH THE PERSON NOR ANY TRANSACTIONS WITH PERSON NAMELY SHRI ASEEM KUMAR GUPTA, CHARTERED ACCOUNTANT WHO IS SAID BY YOUR GOODSELF T O BE THE PARTNER OF M/S AGARWAL VISHWANATH & ASSOCIATES . THE ASSESS EE COMPANY DOES NOT KNOW ANY SUCH FIRM NAMED IN THE QUESTIONNA IRE AS M/S AGARWAL VISHWANATH & ASSOCIATES. DIRECTORS OF ASSE SSEE COMPANY DO NOT KNOW SHRI ASEEM KUMAR GUPTA, CHARTERED ACCOU NTANT AND QUESTION OF ANY MEETING WITH THIS PERSON DOES NOT A RISE. ITA NO. 404, 406 & 404/AGRA/2012 15 D) AFTER THAT THE ASSESSEE COMPANY WAS NEITHER ASKE D ANYTHING ABOUT SHRI ASEEM GUPTA NOR THE ASSESSEE COMPANY WAS REQUIRED TO PRODUCE NOR ANY SUCH STATEMENT WHICH HAS BEEN REPRO DUCED BY THE ASSESSING OFFICER IN THE ASSESSMENT ORDER HAS EVER BEEN SHOWN OR CONFRONTED WITH THE ASSESSEE COMPANY. E) LASTLY AT THE TIME WHEN THE STATEMENT OF SHRI D. C. AGARWAL WAS RECORDED BY THE ASSESSING OFFICER ON 21.12.2011 IT WAS AGAIN ASKED WHETHER YOU KNOW MR. ASEEM GUPTA. IN REPLY SHRI D.C . AGARWAL SPECIFICALLY STATED THAT HE DOES NOT KNOW MR. ASEEM GUPTA AND THE SPECIFIC REQUEST WAS MADE THAT I AM AGAIN AND AGAIN SAYING THAT I DO NOT KNOW THE PERSON NAMED MR. ASEEM GUPTA AND IF TH E SAID PERSON HAS GIVEN ANY WRONG INFORMATION/STATEMENT TO THE DE PARTMENT AS REGARDS MY COMPANIES THEN THE SAID PERSON MAY KINDL Y BE CALLED UPON AND I MAY BE ALLOWED OPPORTUNITY TO CROSS EXAMINE H IM. F) IT IS VERY SURPRISING THAT EVEN AFTER THE SUBMIS SION DATED 19.12.2011 VIDE WHICH SPECIFIC REQUEST WAS MADE THA T IF THERE IS ANY ADVERSE OR CONTRARY EVIDENCE AGAINST US IN YOUR POS SESSION THEN KINDLY PROVIDE US THE COPY OF THE SAME IN CASE OF D OCUMENTARY EVIDENCE SO THAT WE CAN REBUT THE SAME AND AN OPPOR TUNITY TO CROSS EXAMINE MAY ALSO BE PROVIDED IN VIEW OF NATURAL JUS TICE IN THE CASE OF PERSONAL STATEMENT OF ANY PERSON AGAINST THE FACTS SUBMITTED BY US AND FURTHER IN THE STATEMENT OF SHRI DINESH CHAND A GARWAL RECORDED ON 21.12.2011 THE ASSESSING OFFICER WAS AGAIN REQUE STED TO PROVIDE OPPORTUNITY OF CROSS EXAMINATION, EVEN THEN THE ASS ESSING OFFICE HAS NEITHER SHOWN ANY STATEMENT ON WHICH HE HAS RELIED NOR THE ASSESSEE HAS BEEN ALLOWED OPPORTUNITY TO CROSS EXAMINE. G) THAT EVEN AFTER REPEATED REQUEST THE ASSESSING O FFICER HAS NEITHER CONFRONTED THE ASSESSEE WITH THE STATEMENT, AS MENTIONED IN THE ASSESSMENT ORDER, OF SHRI ASEEM GUPTA NOR THE A SSESSING OFFICER HAS ALLOWED OPPORTUNITY OF CROSS EXAMINATION. IT IS THE PRIME DUTY OF THE ASSESSING OFFICER TO ALLOW NOT ONLY THE CROSS E XAMINATION OF THE WITNESS BUT ALSO CONFRONT THE ASSESSEE WITH THE ADV ERSE MATERIAL, IF ANY, BEFORE REACHING TO ANY ADVERSE CONCLUSION. IN LAW THE ASSESSING OFFICER HAS VIDE POWER TO ENFORCE THE ATTENDANCE OF THE WITNESS FOR CROSS EXAMINATION. HONBLE ALLAHABAD HIGH COURT JUDGMENT IN THE CASE OF NATHU RAM PREM CHAND VS. CIT 49 ITR 561 HAS HELD NO INFERENCE CAN BE DRAWN AGAINST AN ASSESSEE MERELY B ECAUSE THE ITA NO. 404, 406 & 404/AGRA/2012 16 ASSESSEE HAD TAKEN A DASTI SUMMONS FOR PRODUCTION O F A WITNESS AND HAD NOT PRODUCED HIM. IT IS THE DUTY OF THE INCOME- TAX OFFICER TO ENFORCE THE ATTENDANCE OF THE WITNESS IF HIS EVIDEN CE IS MATERIAL, IN EXERCISE OF HIS POWERS U/S37(1) OF THE INCOME TAX ACT READ WITH ORDER XVL, RULE IO OF THE CIVIL PROCEDURE CODE. H) THAT IT IS AN ACCEPTED POSITION OF LAW THAT WHEN EVER THE REVENUE PROPOSED TO RELY ON A MATERIAL FOUND FROM THE THIRD PARTY, WHICH IS ADVERSE TO THE ASSESSEE, THE PRINCIPAL OF NATURAL J USTICE REQUIRES TO CONFRONT THE SAME TO THE ASSESSEE. INFACT IN THE AB SENCE OF CROSS EXAMINATION THE VERACITY OF THE STATEMENT MADE BY 3 RD PARTY COMES IN DOUBT AND COULD NOT BE SAID TO BE SACROSANCT SO AS TO CLINCH THE ISSUE AGAINST THE ASSESSEE. I) HONBLE APEX COURT IN THE CASE OF UNION OF INDIA VS . T.R. VERMA REPORTED IN AIR 1957 (SC) 882 HAS HELD WHEN THE ASSESSING OFFICER RECORDED A STATEMENT BEHIND THE BACK OF THE ASSESSEE, IT WAS HIS DUTY TO HAVE ALLOWED THE ASSESSEE TO CROSS EXAM INE SUCH A WITNESS. STATEMENT OF PERSON CANNOT BE USED AGAINST THE ASSE SSEE, IT WAS NOT FOR THE ASSESSEE TO DEMAND CROSS EXAMINATION BUT WA S FOR THE AO TO ALLOW CROSS EXAMINATION IF THE STATEMENT OF THE WIT NESS WERE TO BE MADE THE BASIS OF ADDITION. J) AS REGARDS THE ADDITION IN THE ABSENCE OF CROSS EXA MINATION THE APPELLANT FURTHER RELY ON THE FOLLOWING JUDGMEN TS:- I) HONBLE SUPREME COURT IN THE CASE OF MEHTA PARIK H & CO. VS. CIT REPORTED IN 30 ITR 181 HAS HELD THAT CROSS EXAMINATION OF THE DEPONENT FILING AFFIDAVIT IS A PRIMARY REQUISITE CO NDITION AND IN THE ABSENCE OF THE SOME ADVERSE INFERENCE CAN BE DRAWN. II) ALLAHABAD HIGH COURT IN THE CASE OF L. SOHAN LA L GUPTA VS. CIT REPORTED IN 33 ITR 786 AFTER THE ASSESSEE HAD FILED THE AFFIDAVIT, HE WAS NEITHER CROSS EXAMINED ON THAT POINT, NOR WAS HE CALLED UPON TO P RODUCE ANY DOCUMENTARY EVIDENCE. CONSEQUENTLY, THE ASSESSEE WA S ENTITLED TO ASSUME THAT THE INCOME TAX AUTHORITIES WERE SATISFI ED WITH THE AFFIDAVIT AS SUFFICIENT PROOF ON THIS POINT. IF IT WAS NOT TO BE ACCEPTED AS A SUFFICIENT PROOF EITHER BY THE INCOME TAX OFFICER O R BY THE APPELLATE ASSTT. COMMISSIONER OF INCOME TAX OR BY THE INCOME TAX APPELLATE ITA NO. 404, 406 & 404/AGRA/2012 17 TRIBUNAL, THE ASSESSEE SHOULD HAVE BEEN CALLED UPON TO PRODUCE DOCUMENTARY EVIDENCE, OR, AT LEAST HE SHOULD HAVE B EEN CROSS EXAMINED TO FIND OUT HOW FAR HIS ASSERTIONS IN THE AFFIDAVIT WERE CORRECT. III) HONBLE ITAT DELHI BENCH IN THE CASE OF CIT V S. PRADEEP KUMAR GUPTA REPORTED IN 207 CTR 115 (DEL) REASSESSMENT VALIDITY REOPENING ON THE BASIS O F THIRD PARTYS STATEMENTS ASSESSEES SHOWING AGRICULTURAL INCOME DEPOSITION BY A THAT HE WAS INVOLVEDIN BOGUS TRANSACTION WITH THE ASSESSEES AND PROVIDED ACCOMODATION ENTRIES IN THE FORM OF AGRI CULTURAL RECEIPTS SAME WOULD CONSTITUTE REASON TO BELIEVE THAT INCOME CHARGEABLE TO TAX HAD ESCAPED ASSESSMENT HOWEVER IT WAS MANDATORY F OR THE REVENUE TO PRODUCE A FOR CROSS EXAMINATION BY THE ASSESSEE ON THEIR SPECIFIC DEMAND IN THIS REGARD AO MUST FIRST DISCHARGE THE BURDEN OF SHOWING THAT INCOME HAS ESCAPED ASSESSMENT OPPORT UNITY TO CROSS EXAMINE A DENIED TO THE ASSESSEE REOPENING OF ASS ESSMENT NOT THEREFORE VALID. IV) HONBLE ITAT DELHI BENCH IN THE CASE OF YAMUNA SYNTHETIC (P) LTD VS. DCIT REPORTED IN 91 TTJ 69 HAS HELD ADDITION U/S 68 OF THE ACT MADE ON THE BASIS OF STATEMENT OF K, DIRE CTOR OF CREDITOR SPL, TO THE EFFECT THAT THE IMPUGNED LOAN WAS AN AC COMMODATION ENTRY SAID STATEMENT OF K NOT CONFRONTED TO THE ASSESSEE AND NOT SUBJECTED TO CROSS EXAMINATION INVALID ADDITION LIABLE TO BE DELETED. IN THE PRESENT CASE IT HAS ALSO BEEN HELD THAT IT IS ALSO NOTEWORTHY THAT EVEN AT THE TIME WHEN THE AO RECORD ED THE STATEMENT OF THE ASSESSEES DIRECTOR WITH REGARD TO THE IMPUG NED TRANSACTION NOTHING WAS PUT TO THE ASSESSEE OF ANY MATERIAL CON TRARY TO WHAT WAS BEING CANVASSED BY THE ASSESSEE. THEREFORE, THE ENT IRE EDIFICE BUILT BY THE REVENUE TO VIEW THE TRANSACTION AS SUSPECT IS N OT ON THE BASIS OF A CREDIBLE EVIDENCE. IT IS IN THE REALM OF POSSIBILIT IES THAT THE STATEMENT MADE BY K (DIRECTOR OF SPL) WAS A SELF SERVING STA TEMENT AND THE SAME HAS NOT BEEN SUBJECTED TO ANY CROSS EXAMINAT ION. THE DEPARTMENT HAS NOT LED ANY EVIDENCE OR AMTERIAL WHI CH WOULD LEND SUPPORT TO THE AVERMENTS MADE BY K. K) THAT AS MENTIONED IN FOREGOING PARAS ABOVE THOU GH MR. ASEEM GUPTA IS NEITHER THE DIRECTOR NOR HAS ANY INTEREST IN THE SUBSCRIBER COMPANY, TT IS NOT UNDERSTANDABLE THAT WHY AND UNDE R WHAT CIRCUMSTANCES HE HAS MADE SUCH A STATEMENT AS CLAIM ED BY THE ITA NO. 404, 406 & 404/AGRA/2012 18 DEPARTMENT THOUGH NOT SHOWN TO THE ASSESSEE. UNDER THE FACT AND CIRCUMSTANCES AND THE ACCEPTED LEGAL POSITION AS ME NTIONED ABOVE THOUGH THE STATEMENT OF MR. ASEEM GUPTA CANNOT BE M ADE BASIS OF ADDITION YET EVEN IN THE CASES WHERE THE CREDITOR, THOUGH MR. ASEEM GUPTA IS NOT CREDITOR, TURNS HOSTILE THEN ALSO THE ADDITION CANNOT BE MADE SOLELY ON THE BASIS OF THE STATEMENT IGNORING THE DOCUMENT FILED BY THE ASSESSEE AND THE ONUS BEING DISCHARGED. HONBLE ITAT JAIPUR BENCH IN THE CASE OF SOHAN LAL JAIN VS. ITO REPORTED IN 59 CTR 17 HAS HELD MERELY BECAUSE CREDITOR TURNS HOSTILE, THE STORY OF THE ASSESSEE SETTING UP A CAS H CREDIT SHOULD NOT BE DISBELIEVED ASSESSING AUTHORITY UNDER THE CIRCUMS TANCES REQUIRED TO GO DEEPER INTO THE MATTER AND CALL THE CREDITORS BY ISSUING NOTICE U/S 131 AND FIND OUT TRUTH IF THE ASSESSEE PRODUCES COL LATERAL EVIDENCE TO SHOW THE CIRCUMSTANCES UNDER WHICH CREDITORS HAD RE SILED - FACT THAT ONUS TO PROVE GENUINENESS OF CASH CREDIT IS ON THE ASSESSEE DOES NOT MEAN THAT THE ASSESSEE IS REQUIRED TO WIN OVER FALS E WITNESS IF HE CAN SHOW THAT CREDITORS HAD RESILED. (V) RE: BLACK DAIRY I) THE ASSESSING OFFICER IN THE ASSESSMENT ORDER AT PAGE 2 HAS MENTIONED ABOUT A BLACK DAIRY SAID TO HAVE BEEN FOU ND AND IMPOUNDED FROM THE OFFICE OF SHRI ASEEM GUPTA WHICH HAS ALSO BEEN MADE ONE OF THE GROUND BY THE ASSESSING OFFICER TO MADE ADDITION U/S 68 OF THE ACT. II) AS REGARDS THE BLACK DAIRY, MR. ASEEM GUPTA IN HIS SO CALLED STATEMENT, THOUGH NEVER CONFRONTED TO THE ASSESSEE, WHICH HAS BEEN REPRODUCED BY THE ASSESSING OFFICER IN THE ASSESSME NT ORDER, HE HAS CLEARLY STATED THAT:- THE TRANSACTION PERTAIN TO F.Y. 2004-05 AND MORE S PECIFICALLY FEBRUARY 2005 AND MARCH 2005 WHICH DOES NOT RELATE S TO THE YEAR UNDER CONSIDERATION. THUS EVEN THE TRANSACTIONS AS SAID TO HAVE BEEN NOTED IN THE BLACK DAIRY HAS NO RELEVANCY AT ALL AN D CANNOT BE MADE BASIS OF ADDITION FOR THE FOLLOWING REASONS:- A) THE TRANSACTIONS AS NOTED IN THE SO CALLED BLACK DAIRY WERE NEITHER SHOWN TO THE ASSESSEE NOR COPY OF THE SAME WAS PROVIDED, NOR THE ASSESSEE WAS EVER CONFRONTED WITH THE SAME THOU GH SPECIFICALLY ASKED AGAIN AND AGAIN THAT IF THERE IS ANY ADVERSE MATERIAL OR EVIDENCE AGAINST US IS IN YOUR POSSESSION THEN KIN DLY PROVIDE US THE ITA NO. 404, 406 & 404/AGRA/2012 19 COPY OF THE SAME IN CASE OF DOCUMENTARY EVIDENCE SO THAT WE CAN REBUT THE SAME. B) THAT AS PER THE STATEMENT OF MR. ASEEM GUPTA AS REPRODUCED BY THE ASSESSING OFFICER AT PAGE 2 OF THE ASSESSMEN T ORDER, THE TRANSACTION AS NOTED IN THE BLACK DAIRY PERTAINING TO F.Y. 2004-05 ARE FROM THE COMPANY EITHER M/S KMC PORTFOLIO (P) LTD O R M/S GANPATI FINCAP SERVICES (P) LTD. NEITHER ANY SHARE CAPITAL FROM M/S KMC PORTFOLIO (P) LTD AND M/S GANPATI FINCAP SERVICES ( P) LTD HAS BEEN RECEIVED IN F.Y. 2004-05 NOR ANY SUCH ADDITION HAS BEEN MADE BY THE ASSESSING OFFICER IN F.Y. 2004-05 RELEVANT TO ASSES SMENT YEAR 2005- 06. C) THAT TRANSACTION AS CLAIMED TO HAVE BEEN NOTED R ELATES TO F.Y. 2004-05 AND HENCE ON THIS GROUND ALSO, THOUGH NOT A DMITTED, NO ADDITION CAN BE MADE IN A.Y. 2007-08 AND A.Y. 2008 -09. VI) THAT UNDER THE FACTS AND CIRCUMSTANCES OF THE C ASE, AS MENTIONED ABOVE, SUBMISSION AND DOCUMENT FILED TIME TO TIME, ALONGWITH THE STATEMENT AND INFORMATION GIVEN BY TH E DIRECTOR OF THE SUBSCRIBER COMPANY IN RESPONSE TO THE DIRECT AND IN DEPENDENT ENQUIRY MADE BY THE ASSESSING OFFICER, CONFIRMS AND ESTABLI SH THE FACTS OF INVESTMENT MADE BY THE SUBSCRIBER COMPANY IN THE SH ARE CAPITAL OF THE ASSESSEE COMPANY. VII) THAT THE DOCUMENTS AS MENTIONED ABOVE CONCLUSI VELY PROVES THAT THE SUBSCRIBER COMPANY IS EXISTING COMPANY WIT H ESTABLISHED IDENTITY, HAVE CAPACITY AND CREDITWORTHINESS TO MAK E THE INVESTMENT AND THE INVESTMENT MADE BY THEM ARE GENUINE. THE SA ME IS BEING FURTHER ELABORATELY SUBMITTED AS UNDER:- EXISTENCE AND ESTABLISH IDENTITY THE IDENTITY OF THE SUBSCRIBER COMPANY IS UNDISPUTE D AND CANNOT BE QUESTIONED SINCE IT IS EXISTING COMPANY DULY REGISTERED WITH REGISTRAR OF COMPANIES, HAVING VALID PERMANENT ACCOUNT NUMBER AND SUBMITTED THEIR FINANCIAL STATEMENTS REGULARLY AND ASSESSED TO TAX . FURTHER, THE INDEPENDENT IDENTITY IS ALSO SUBSTANTIATED FROM THE FACT THAT THE DIRECTORS OF THE SUBSCRIBER COMPANY RESPONDED TO TH E DIRECT INDEPENDENT ENQUIRY MADE BY THE DEPARTMENT. MOREOVE R, THE SUBSCRIBER COMPANY BANK ACCOUNT AND NUMEROUS TRANSA CTIONS APPEARING THEREIN WITH DIFFERENT PARTIES IS ALSO EVIDENCE OF THE INDEPENDENT IDENTITY AND EXISTENCE. CREDIT WORTHINESS AND CAPACITY THE CREDIT WORTHINESS AND CAPACITY OF THE SUBSCRIBE R COMPANY CAN ALSO NOT BE DOUBTED. IT IS EVIDENT FROM THEIR BALA NCE SHEETS THAT THE ITA NO. 404, 406 & 404/AGRA/2012 20 SUBSCRIBER COMPANY IS COMPANY WITH SOUND NET WORTH AND HUGE RESERVES. ALSO, THE AMOUNT RECEIVED FROM THE SUBSCR IBER COMPANY IS THROUGH REGULAR BANKING CHANNELS, DETAILS OF WHICH WERE FILED BY THE ASSESSEE COMPANY AND ALSO DIRECTLY BY THE SUBSCRIBE R COMPANY WHICH SHOWS A NUMBER OF TRANSACTIONS WITH VARIOUS PARTIES GENUINENESS THE SUBSCRIBER COMPANY HAS CONFIRMED THEIR INVESTME NT IN THE SHARE CAPITAL OF THE ASSESSEE COMPANY. THEIR CONFIRMATION ALONGWITH OTHER DOCUMENT WHICH PROVES THE GENUINENESS OF A TRANSACT ION WERE FILED BY THE ASSESSEE COMPANY AND WERE ALSO SENT BY THEM TO THE ASSESSING OFFICER ON DIRECT AND INDEPENDENT ENQUIRY. GENUINEN ESS IS ALSO PROVED FROM THE FACT THAT THE SHARES WERE ALLOTTED AND THE SHARE CERTIFICATE WERE ISSUED WHICH THE SUBSCRIBER COMPAN Y HAS ALSO CONFIRMED. COPY OF SHARE CERTIFICATE SENT BY THEM A RE ON RECORD OF ASSESSING OFFICER. FURTHER THE HIGH NET WORTH OF SU BSCRIBER COMPANY SUBSTANTIATED THE GENUINENESS OF THE TRANSACTIONS. VIII) CONSIDERING ALL THESE FACTS AND SUBMISSION AS MENTIONED ABOVE THE ASSESSEE COMPANY FULLY DISCHARGED HIS ONUS AS R EQUIRED U/S 68 OF THE ACT. IX) IT IS SETTLED POSITION OF LAW THAT WHERE A MATT ER CONCERNS RECEIPTS BY WAY OF SHARE APPLICATION FROM INVESTOR, THE ASSESSEE HAS TO PROVE THE EXISTENCE OF THE PERSONS FROM WHOM THE SH ARE APPLICATION IS RECEIVED. ONCE THE EXISTENCE IS PROVED IT IS NOT FU RTHER THE BURDEN OF THE ASSESSEE TO PROVE WHETHER THAT PERSON ITSELF HA S INVESTED THE MONEY OR SOME OTHER PERSON HAS MADE THE INVESTMENT OR ANYTHING ELSE, THOUGH IN THE CASE OF ASSESSEE COMPANY THE DO CUMENT FILED AND THE INFORMATION/DOCUMENT RECEIVED FROM SUBSCRIBER C OMPANY ON DIRECT ENQUIRY AND THERE BEING NO DIRECT ADVERSE MA TERIAL, THE CREDITWORTHINESS AND GENUINENESS OF THE SHARE APPLI CATION MONEY RECEIVED IS ALSO PROVED THOUGH UNDER LAW NOT REQUIR ED. X) IN SUPPORT OF THE SUBMISSION AS MENTIONED ABOVE THE ASSESSEE COMPANY WISH TO PLACE RELIANCE ON THE FOLLOWING JUD GMENTS:- COMMISSIONER OF INCOME TAX VS. LOVELY EXPORTS (P) L TD. (2008) 216 CTR (SC) 195 IF THE SHARE APPLICATION MONEY IS RECEIVED BY THE A SSESSEE COMPANY FROM ALLEGED BOGUS SHAREHOLDERS, WHOSE NAMES ARE GI VEN TO THE ASSESSING OFFICER, THEN THE DEPARTMENT IS FREE TO P ROCEED TO REOPEN THEIR INDIVIDUAL ASSESSMENTS IN ACCORDANCE WITH LAW BUT THIS AMOUNT ITA NO. 404, 406 & 404/AGRA/2012 21 OF SHARE MONEY CANNOT BE REGARDED AS UNDISCLOSED IN COME U/S 68 OF THE ASSESSEE COMPANY. CIT V. STELLAR INVESTMENT LTD. (1991)192 ITR 287(DE LHI) WHERE THE INCREASE IN SUBSCRIBED CAPITAL OF THE RES PONDENT-COMPANY, ACCEPTED BY THE INCOME TAX OFFICER AND REJECTED BY THE COMMISSIONER ON THE GROUND THAT A DETAILED INVESTIGATION WAS REQ UIRED REGARDING THE GENUINENESS OF SUBSCRIBERS TO SHARE CAPITAL, AS THE RE WAS A DEVICE OF CONVERTING BLACK MONEY BY ISSUING SHARES, WITH THE HELP OF FORMATION OF AN INVESTMENT, WHICH WAS REVERSED BY THE TRIBUNA L, THE DELHI HIGH COURT HELD THAT EVEN IF IT IS TO BE ASSUMED THAT TH E SUBSCRIBERS TO THE INCREASED SHARE CAPITAL WERE NOT GENUINE, UNDER NO CIRCUMSTANCES THE AMOUNT OF SHARE CAPITAL COULD BE REGARDED AS UNDISC LOSED INCOME OF THE COMPANY. THE ORDER OF THE HIGH COURT IS AFFIRMED BY THE HON BLE APEX COURT REPORTED IN 164 CTR 287. COMMISSIONER OF INCOME TAX VS ELECTRO POLYCHEM LTD. REPORTED AT (2008) 217 CTR (MAD) 371 WHILE DISMISSING THE APPEAL OF THE REVENUE THE HON BLE HIGH COURT REFERRED TO THE CASE OF CIT V. STELLAR INVESTMENT L TD. (1991)192 ITR 287(DELHI) WHERE THE INCREASE IN SUBSCRIBED CAPITAL OF THE RESPONDENT-COMPANY, ACCEPTED BY THE INCOME TAX OFFI CER AND REJECTED BY THE COMMISSIONER ON THE GROUND THAT A D ETAILED INVESTIGATION WAS REQUIRED REGARDING THE GENUINENES S OF SUBSCRIBERS TO SHARE CAPITAL, AS THERE WAS A DEVICE OF CONVERTI NG BLACK MONEY BY ISSUING SHARES, WITH THE HELP OF FORMATION OF AN IN VESTMENT, WHICH WAS REVERSED BY THE TRIBUNAL, THE DELHI HIGH COURT HELD THAT EVEN IF IT IS TO BE ASSUMED THAT THE SUBSCRIBERS TO THE INCREASED SHARE CAPITAL WERE NOT GENUINE, UNDER NO CIRCUMSTANCES THE AMOUNT OF S HARE CAPITAL COULD BE REGARDED AS UNDISCLOSED INCOME OF THE COMP ANY. COMMISSIONER OF INCOME TAX VS FIRST POINT FINANCE P VT. LTD. REPORTED AT (2006) 286 ITR 477 (RAJ) TRIBUNAL HAVING FOUND THAT THE SUBSCRIBERS ARE GENU INELY EXISTING PERSONS AND THEY HAVE FILED CONFIRMATIONS IN RESPEC T OF INVESTMENTS MADE BY THEM AND THEIR STATEMENTS WERE ALSO RECORDE D, THE AMOUNT OF SHARE CAPITAL/SHARE APPLICATION MONEY COULD NOT BE TREATED AS UNEXPLAINED CASH CREDITS AND NO ADDITION COULD BE M ADE UNDER S. 68. ITA NO. 404, 406 & 404/AGRA/2012 22 BARKHA SYNTHETICS LTD. VS. ASSTT. CIT 197 CTR (RAJ) 432. SHARE APPLICATIONS ARE MADE BY NUMBER OF PERSONS, M AY BE IN THEIR OWN NAMES OR BENAMI, BUT THE FACT THAT SHARE APPLIC ATIONS RECEIVED FROM DIFFERENT PLACES ACCOMPANIED WITH SHARE APPLIC ATION MONEY ON THIS ONLY GROUND NO PRESUMPTION CAN BE DRAWN THAT S AME BELONG TO THE ASSESSEE. FURTHER THE SAME CANNOT BE ASSESSED I N HIS HANDS AS HIS UNDISCLOSED INCOME UNLESS SOME NEXUS IS ESTABLISHED THAT SHARE APPLICATION MONEY FOR AUGMENTING THE INVESTMENT IN BUSINESS HAS FLOWN FROM ASSESSEES OWN MONEY. COMMISSIONER OF INCOME TAX VS DIVINE LEASING AND FI NANCE LTD. (2008) 299 ITR 268 (DEL) THERE CANNOT BE TWO OPINIONS ON THE ASPECT THAT THE PERNICIOUS PRACTICE OF CONVERSION OF UNACCOUNTED MONEY THROUGH THE MASQUERADE OR CHANNEL OF INVESTMENT IN THE SHARE CAPITAL OF A COMPANY MUST BE FIRMLY EXCORIATED BY THE REVENUE. EQUALLY, WHERE TH E PREPONDERANCE OF EVIDENCE INDICATES ABSENCE OF CULPABILITY AND CO MPLEXITY OF THE ASSESSEE IT SHOULD NOT BE HARASSED BY THE REVENUES INSISTENCE THAT IT SHOULD PROVE THE NEGATIVE. IN THE CASE OF A PUBLIC ISSUE, THE COMPANY CONCERNED CANNOT BE EXPECTED TO KNOW EVERY DETAIL P ERTAINING TO THE IDENTITY AS WELL AS FINANCIAL WORTH OF EACH OF ITS SUBSCRIBERS. THE COMPANY MUST, HOWEVER, MAINTAIN AND MAKE AVAILABLE TO THE AO FOR HIS PERUSAL, ALL THE INFORMATION CONTAINED IN THE S TATUTORY SHARE APPLICATION DOCUMENTS. IN THE CASE OF PRIVATE PLACE MENT THE LEGAL REGIME WOULD NOT BE THE SAME. A DELICATE BALANCE MU ST BE MAINTAINED WHILE WALKING THE TIGHTROPE OF SS. 68 AND 69 OF THE IT ACT. THE BURDEN OF PROOF CAN SELDOM BE DISCHARGED TO THE HILT BY TH E ASSESSEE; IF THE AO HARBOURS DOUBTS OF THE LEGITIMACY OF ANY SUBSCRI PTION HE IS EMPOWERED, NAY DUTY BOUND, TO CARRYOUT THOROUGH INV ESTIGATIONS. BUT IF THE AO FAILS TO UNEARTH ANY WRONG OR ILLEGAL DEA LINGS, HE CANNOT OBDURATELY ADHERE TO HIS SUSPICIONS AND TREAT THE S UBSCRIBED CAPITAL AS THE UNDISCLOSED INCOME OF THE COMPANY. HONBLE GAUHATI HIGH COURT IN THE CASE OF CIT VS. D OWN TOWN HOSPITALS (P) LTD REPORTED IN 267 ITR 439 HAS HELD THAT REGARDING AMOUNTS RECEIVED AS SHARE APPLICATION MON EYS, THE TRIBUNAL HAD GIVEN A CLEAR FINDING AFTER APPRECIATI ON OF THE MATERIALS ON RECORD THAT THE ASSESSEE HAD FILED THE DETAILS R EGARDING THE SOURCE ITA NO. 404, 406 & 404/AGRA/2012 23 OF FUNDS OF THE PARTIES AND THEIR INCOME TAX FILE N UMBERS BEFORE THE AO. ACCORDING TO THE TRIBUNAL, THE ASSESSEE HAD ALS O SUBMITTED BEFORE THE AO THE CONFIRMATIONS FROM THE CREDITORS WHERE F ULL ADDRESSES INCOME TAX FILE NUMBERS, ETC, WERE GIVEN. THE TRIBU NAL WAS JUSTIFIED IN DELETING THE ADDITION OF THE SUMS FROM THE INCOME O F THE ASSESSEE HONBLE ALLAHABAD HIGH COURT IN THE CASE OF M/S JAY A SECURITUIES LTD. VS. CIT-II, KANPUR REPORTED IN 166 TAXMANN PAG E 7, THE HEAD NOTE OF THE JUDGMENT AS UNDER: WHETHER AN ADDITION U/S 68 CAN BE MADE IN RESPECT OF INVESTMENT MADE BY DIFFERENT PERSONS IN SHARE CAPITAL OF ASSES SEE COMPANY, LIMITED BY SHARES, WHETHER PUBLIC OR PRIVATE HELD NO HONBLE ITAT JODHPUR BENCH (THIRD MEMBER) IN THE CA SE OF UMA POLYMERS (P) LTD VS. DCIT SPL RANGE REPORTED IN (2006) 100 ITD PAGE 1, THE HEAD NOTE OF THE JUDGMENT AS UNDER: WHETHER DISTINCTION BETWEEN A PUBLIC AND A PRIVATE LIMITED COMPANY IS NOT VERY MATERIAL, AS FAR AS INTRODUCTION OF SHA RE CAPITAL MONEY IS CONCERNED HELD YES WHETHER IN RESPECT OF SHARE APPLICATION MONEY RECEIVED FROM SUBSCRIBERS, ASSESSEE COMPANY H AS TO PROVE ONLY EXISTENCE OF PERSON IN WHOSE NAME SHARE APPLICATION IS RECEIVED HELD YES WHETHER IF IDENTITY OF CREDITOR IS ESTAB LISHED, THEN BURDEN TO PROVE THAT MONEY ADVANCED BY CREDITOR DID NOT BELON G TO HIM BUT TO SOMEBODY ELSE IS ON REVENUE WHO HAS TO FIND REAL SU BSCRIBER AND, IF ANY SHARE HOLDER IS FOUND TO HAVE MADE UNEXPLAINED INVESTMENT, THEN ADDITION OF SUCH INVESTMENT IS REQUIRED TO BE MADE IN HANDS OF SHARE HOLDER AND NOT IN ACCOUNT OF ASSESSEE HELD YES, W HETHER WHERE ASSESSEE COMPANY HAD RECEIVED SHARE APPLICATION MON EY THROUGH BANKING CHANNELS AND IT HAD SUBMITTED DETAILED LIST OF SHARE HOLDER, THEIR GIR NO. AND INCOME TAX PARTICULARS AND THEIR BANK STATEMENT, IDENTITY OF SHARE HOLDERS WAS FULLY ESTABLISHED AND . THEREFORE, NO ADDITION COULD BE MADE IN ASSESSEES HANDS UNDER SE CTION 68 ON ACCOUNT OF SHARE APPLICATION MONEY HELD YES. HONBLE ITAT AGRA BENCH IN THE CASE OF M/S JAI HOSP ITALS & RESEARCH CENTRE (P) LTD, AGRA (ITA NO. 160/A/2004) HAS HELD THUS IT BECOMES EVIDENTLY CLEAR THAT IF THE COMPANY ESTA BLISHES THE IDENTITY OF SHARE APPLICANTS AND THAT THEY HAVE INVESTED IN SHARES, NO SUCH MONEY CAN BE ADDED IN COMPANYS HAND U/S 68 AS ITS UNDISCLOSED ITA NO. 404, 406 & 404/AGRA/2012 24 INCOME. IN THE GIVEN CASE THE ASSESSEE COMPANY HAS ESTABLISHED THE IDENTITY AND THE INVESTMENT BY THEM IN SHARES. IN V IEW OF THE ABOVE SETTLED LEGAL POSITION, THERE IS MERITS IN THE SUBM ISSION OF THE LD. A.R. THAT SINCE ALL THE SHARE HOLDERS HAVE BEEN IDENTIFI ED ON RECORD BY THE ASSESSEE COMPANY, NO ADDITION ON ACCOUNT OF UNEXPLA INED SHARE CAPITAL CAN BE MADE IN THE HANDS OF THE ASSESSEE CO MPANY THIS ORDER OF HONBLE ITAT AGRA BENCH HAS BEEN AFFI RMED BY HONBLE ALLAHABAD HIGH COURT. XI) IN THE PRESENT CASE THE ASSESSEE COMPANY HAS FU LLY DISCHARGED THE ONUS BY NOT ONLY PROVING/ESTABLISHING THE IDENT ITY OF THE SUBSCRIBER COMPANY BUT HAS ALSO PROVED BEYOND DOUBT THE CREDIT WORTHINESS AND GENUINENESS OF THE SUBSCRIBER COMPANY AND THE AMOUN T RECEIVED AS SHARE CAPITAL. IT IS A SETTLED POSITION OF LAW THAT IN CASE OF CASH CREDIT U/S 68 OF THE ACT THE ASSESSEE IS NOT REQUIRED TO P ROVE THE SOURCE OF THE SOURCE OF DEPOSIT. THOUGH IN THE PRESENT CASE THE A MOUNT RECEIVED AS SHARE APPLICATION MONEY IS THROUGH BANKING CHANNEL S AND THE EARLIER DEPOSIT IN THE BANK ACCOUNT OF THE SUBSCRIBER COMPA NY IS THROUGH CLEARING NOT CASH. XII) THERE ARE VARIOUS JUDICIAL PRONOUNCEMENT IN WH ICH IT HAS BEEN HELD THAT TO DISCHARGE THE ONUS AS REQUIRED IN SECT ION 68 OF THE ACT THE ASSESSEE IS NOT REQUIRED TO PROVE THE SOURCE OF THE SOURCE. RELIANCE IS PLACED ON THE FOLLOWING JUDGMENTS:- HONBLE RAJASTHAN HIGH COURT IN THE CASE OF AARAVAL I TRADING CO. VS. ITO REPORTED IN 8 DTR PAGE 199 , THE HEADNOTE OF THE JUDGMENT AS UNDER:- INCOME CASH CREDIT BURDEN OF PROOF ONCE THE EXISTENCE OF THE CREDITORS IS PROVED AND SUCH PERSONS OWN THE CREDIT WHICH ARE FOUND IN THE BOOKS OF THE ASSESSEE, THE ASSESSEES ONUS S TANDS DISCHARGED AND THE LATTER IS NOT FURTHER REQUIRED O PROVE THE SOURCE FROM WHICH THE CREDITORS COULD HAVE ACQUIRED THE MONEY DEPOSIT ED WITH HIM EITHER IN TERMS OF S. 68 OR ON GENERAL PRINCIPLE MERELY BECAUSE THE DEPOSITORS EXPLANATION ABOUT THE SOURCES OF MONEY WAS NOT ACCEPETABLE TO THE A.O., IT CANNOT BE PRESUMED THAT THE DEPSOITS MADE BY THE CREDITORS IS MONEY BELONGING TO ASSESSEE ITS ELF IF THE CREDITORS EXPLANATION ABOUT THE SOURCE OF DEPOSIT IS NOT FOUND TO BE ACCEPTABLE, THE INVESTMENT OWNED BY SUCH PERSONS MA Y BE SUBJECTED TO ITA NO. 404, 406 & 404/AGRA/2012 25 PROCEEDING FOR INCLUSION OF THE AMOUNTS AS THEIR IN COME FROM UNDISCLOSED SOURCES, OR IF THEY ARE FOUND BENAMI, T HE REAL OWNER CAN BE BROUGHT TO TAX IN THE ABSENCE OF ANYTHING TO E STABLISH THAT THE SOURCES OF CREDITORS DEPOSIT FLEW FROM THE ASSESSE E, THE CASH CREDIT CANNOT BE TREATED AS UNEXPLAINED INCOME OF THE ASSE SSEE HONBLE SUPREME COURT IN THE CASE OF CIT VS. DAULAT RAM RAWAT MULL REPORTED IN 87 ITR 349 HAS HELD THE FACT THAT B HAD NOT BEEN ABLE TO GIVE A SATISFACTORY EXPLANATION RE GARDING THE SOURCE OF RS. 5,00,000/- WOULD NOT BE DECISIVE EVEN A MATT ER AS TO WHETHER B WAS OR WAS NOT THE OWNER OF THAT AMOUNT. A PERSON C OULD STILL BE HELD TO BE THE OWNER OF A SUM OF MONEY EVEN THOUGH THE E XPLANATION FURNISHED BY HIM REGARDING THE SOURCE OF THAT MONEY WAS FOUND TO BE NOT CORRECT. HONBLE GUJARAT HIGH COURT IN THE CASE OF DCIT VS. ROHINI BUILDERS REPORTED IN 256 ITR 360 (GUJ) HAS HELD THE TRIBUNAL FOUND THAT THE ASSESSEE HAD DISCHARGED THE INITIAL ONUS WHICH LAY ON IT IN TERMS OF SECTION 68 BY PROVING THE IDENTITY OF T HE CREDITORS BY GIVING THEIR COMPLETE ADDRESSES, GIR NUMBERS/PERMANENT ACC OUNT NUMBER AND THE COPIES OF ASSESSMENT ORDER WHERE EVER READI LY AVAILABLE, THAT IT HAD ALSO PROVED THE CAPACITY OF THE CREDITORS BY SHOWING THAT THE AMOUNT WERE RECEIVED BY THE ASSESSEE BY ACCOUNT PAY EE CHEQUES DRAWN FROM BANK ACCOUNTS OF THE CREDITORS AND THE A SSESSEE WAS NOT ACCEPTED TO PROVE THE GENUINENESS OF THE CASH DEPOS ITED IN THE BANK ACCOUNT OF THOSE CREDITORS BECAUSE UNDER LAW THE AS SESSEE CAN BE ASKED TO PROVE THE SOURCE OF CREDITS IN ITS BOOKS O F ACCOUNTS BUT NOT THE SOURCE OF THE SOURCE. SLP FILED BY THE DEPARTMENT IN THE CASE OF ROHINI B UILDERS HAS BEEN DISMISSED (254 ITR [STATUTE] 275) HONBLE GAUHATI HIGH COURT IN THE CASE OF NEMI CHAN D KOTHARI VS. CIT AND ANOTHER REPORTED IN 264 ITR 254 THAT IT IS NOT THE BUSINESS OF THE ASSESSEE TO FIND OUT WHETHER TH E SOURCE OR SOURCES FROM WHICH THE CREDITOR HAD AGREED TO ADVANCE THE A MOUNTS WERE GENUINE OR NOT. IF A CREDITORS HAS, BY ANY UNDISCLO SED SOURCE, A PARTICULAR AMOUNT OF MONEY IN THE BANK, THERE IS NO LIMITATION UNDER THE LAW ON THE PART OF THE ASSESSEE TO OBTAIN SUCH AMOUNT OF MONEY OR PART THEREOF FROM THE CREDITOR, BY WAY OF CHEQUE IN THE FORM OF LOAN ITA NO. 404, 406 & 404/AGRA/2012 26 AND IN SUCH A CASE, IF THE CREDITOR FAILS TO SATISF Y AS TO HOW HE HAD ACTUALLY RECEIVED THE SAID AMOUNT AND HAPPENED TO K EEP IT IN THE BANK, THE SAID AMOUNT CANNOT BE TREATED AS INCOME OF THE ASSESSEE FROM UNDISCLOSED SOURCES. HONBLE MADHYA PRADESH HIGH COURT IN THE CASE OF CI T VS. METACHEM INDUSTRIES REPORTED IN 245 ITR 160 HAS HELD ONCE IT IS ESTABLISHED THAT THE AMOUNT HAS BEEN INVESTED BY A PARTICULAR PERSON, BE HE A PARTNER OR AN INDIVIDUAL, THEN THE RESPONSI BILITY OF THE ASSESSEE IS OVER. WHETHER THAT PERSON IS AN INCOME TAX PAYER OR NOT AND WHERE HE HAD BROUGHT THIS MONEY FROM, IS NOT TH E RESPONSIBILITY OF THE FIRM HONBLE PATNA HIGH COURT IN THE CASE OF SAROGI CRED IT CORPORATION VS. CIT (1976) 103 ITR 344 HAS HELD IT WILL NOT, THEREFORE, BE FOR THE ASSESSEE TO EXPLAIN FURTHER A S TO HOW OR IN WHAT CIRCUMSTANCES THE THIRD PARTY OBTAINED THE MONEY OR HOW OR WHY HE CAME TO MAKE AN ADVANCE OF THE MONEY AS A LOAN TO T HE ASSESSEE. ONCE SUCH IDENTITY IS ESTABLISHED AND THE CREDITORS , AS IN THE PRESENT CASE, HAVE PLEDGED THEIR OATH THAT THEY HAVE ADVANC ED THE AMOUNTS IN QUESTION TO THE ASSESSEE, THE BURDEN IMMEDIATELY SH IFTS ON TO THE DEPARTMENT TO SHOW AS TO WHY THE ASSESSEES CASE CO ULD NOT BE ACCEPTED. HONBLE ITAT AGRA BENCH IN THE CASE OF SUBHASH DALL MILL VS. ACIT REPORTED IN 257 ITR 115 HAS HELD THE SOURCE OF THE SOURCE OF THE ASSESSEES CREDIT CANNOT BE INQUIRED BY THE DEPARTMENT. XIII) THAT IN THE ASSESSMENT ORDER THE ASSESSING OF FICER HAS MENTIONED THAT IN THE SO CALLED STATEMENT MR. ASEEM GUPTA HAS ALSO STATED THE MODUS OPERANDI THAT INITIALLY THE CASH I S BEING RECEIVED WHICH IS BEING DEPOSITED IN THE BANK ACCOUNT OPENED IN THE NAME OF M/S ABM TRADERS AND M/S SURYA ENTERPRISES FROM WHER E THE MONEY IS ROUTED IN THE BANK ACCOUNT OF THE SUBSCRIBER COMPAN Y AND THE AMOUNT RECEIVED AS SHARE CAPITAL IS INFACT THE APPELLANTS OWN MONEY. IN THIS REGARD THE APPELLANT RESPECTFULLY SUBMIT:- A) THAT DURING SEARCH AT THE BUSINESS PREMISES OF T HE ASSESSEE AND AT THE RESIDENTIAL PREMISES OF THE DIRECTOR NOT A S INGLE PAPER/DOCUMENT OR ANYTHING ELSE WAS FOUND FOR WHICH INFERENCE CAN BE DRAWN THAT THE AMOUNT RECEIVED AS SHARE CAPITAL WAS INFACT THE APPELLANTS OWN UNDISCLOSED AND UNEXPLAINED MONEY R OUTED THROUGH ITA NO. 404, 406 & 404/AGRA/2012 27 THE BANK ACCOUNT OF THE CONCERNS AS MENTIONED IN TH E ASSESSMENT ORDER. B) THAT NEITHER ANY MATERIAL/DOCUMENT/PAPER WAS FOU ND DURING SEARCH INDICATING ANY UNDISCLOSED INCOME OF THE ASS ESSEE COMPANY NOR IN THE ASSESSMENT FRAMED U/S 153A OF THE ACT TH E ASSESSING OFFICER HAS HELD SO. DECLARED BUSINESS RESULTS HAS BEEN ACC EPTED BY THE ASSESSING OFFICER HENCE IT CANNOT BE PRESUMED THAT THERE IS ANY OTHER SOURCE OF UNDISCLOSED INCOME. C) IT IS THE DUTY OF THE DEPARTMENT TO BRING PROPER EVIDENCE ON RECORD TO PROVE THAT IT IS THE APPELLANTS OWN MONE Y WHICH HAS BEEN ROUTED IN THE FORM OF SHARE CAPITAL. IN THE PRESENT CASE THE ASSESSING OFFICER HAS NOT DISCHARGED HIS BURDEN BUT ON THE CO NTRARY HAS SOLELY RELIED ON THE SO CALLED STATEMENT OF MR. ASEEM GUPT A WHICH AS PER THE FACTS AND SUBMISSION MENTIONED ABOVE IS WRONG, WITH OUT ANY ADVERSE MATERIAL TO HOLD SO, NOT RELATES TO RELEVANT ASSESS MENT YEAR AND IN THE ABSENCE OF CROSS EXAMINATION CANNOT BE RELIED UPON. D) HONBLE SUPREME COURT IN THE CASE OF KISHIN CHAND CHELLA RAM VS. CIT (1980) 125 ITR 713 (S.C.) HAS OBSERVED THAT BURDEN IS ON THE DEPARTMENT TO PROVE THAT THE MONEY BELONGED TO THE ASSESSEE BY BRINGING PROPER EVIDENCE ON RECORD AND THE ASSES SEE COULD NOT BE EXPECTED TO CALL THE CONCERNED PERSON IN EVIDENCE T O HELP THE DEPARTMENT TO DISCHARGE THE BURDEN THAT LAY UPON IT . E) HONBLE BOMBAY HIGH COURT IN THE CASE OF SMT. PANNA DEVI CHOWDHARY (1994) 208 ITR 849 (BOM.) HAS HELD THAT INCOME INCOME FROM UNDISCLOSED SOURCESBURDEN OF PROOFREC EIPT OF AMOUNTBURDEN OF PROVING THAT RECEIPT CONSTITUTED I NCOME OF ASSESSEE IS ON THE REVENUE. XIV) THOUGH THE ORDER PRONOUNCED BY THE APEX COURT HAPPENS TO BE THE LAW OF LAND AND BINDING ON ALL THE AUTHORITIES FUNCTIONING IN INDIA STILL IT IS TRITE LAW THAT THE ORDER PASSED BY THE JURISDICTIONAL TRIBUNAL / HIGH COURTS ARE BINDING ON ALL THE TAX AUTHORITIE S FUNCTIONING UNDER THE JURISDICTION OF TRIBUNAL / HIGH COURTS. IN THIS REGARD, YOUR GOODSELF KIND ATTENTION IS DRAWN TOWARDS THE FOLLOW ING CASE LAWS WHEREIN BINDING NATURE OF THE ORDERS OF THE TRIBUNAL / HIGH COURTS HAS BEEN DISCUSSED: - ITA NO. 404, 406 & 404/AGRA/2012 28 K.N. AGARWAL VS. CIT (1999) 100 CTR (ALL) 170: (19 91) 189 ITR 769 (ALL) INDEED, THE ORDERS OF THE TRIBUNAL AND THE HIGH CO URT ARE BINDING UPON THE ASSESSING OFFICER AND SINCE HE ACTS IN A Q UASI JUDICIAL CAPACITY, THE DISCIPLINE OF SUCH FUNCTIONING DEMAND S THAT HE SHOULD FOLLOW THE DECISION OF THE TRIBUNAL OR THE HIGH COU RT, AS THE CASE MAY BE. HE CANNOT IGNORE IT MERELY ON THE GROUND THAT T HE TRIBUNALS ORDER IS THE SUBJECT MATTER OF REVISION IN THE HIGH COURT OR THAT THE HIGH COURTS DECISION IS UNDER APPEAL BEFORE THE SU PREME COURT. PERMITTING HIM TO TAKE SUCH A VIEW WOULD INTRODUCE JUDICIAL INDISCIPLINE, WHICH IS NOT CALLED FOR EVEN IN SUCH CASES. IT WOULD LEAD TO A CHAOTIC SITUATION. AGRAWAL WAREHOUSING AND LEASING LTD. VS. CIT (2002 ) 257 ITR 235 (MP) THE ORDERS PASSED BY THE TRIBUNAL ARE BINDING ON A LL THE REVENUE AUTHORITIES FUNCTIONING UNDER THE JURISDICTION OF T HE TRIBUNAL. THE PRINCIPLES OF JUDICIAL DISCIPLINE REQUIRE THAT THE ORDERS OF THE HIGHER APPELLATE AUTHORITIES SHALL BE FOLLOWED UNRESERVEDL Y BY THE SUB- ORDINATE AUTHORITIES. UNION OF INDIA VS. KAMALAKSHI FINANCE CORPORATION LTD., AIR 1992 SC 711; [1991] 55 ELT 433 (SC) EMPHASIZED (PAG E 712 OF AIR 1992 SC) IT CANNOT BE TOO VEHEMENTLY EMPHASISED THAT IT IS OF UTMOST IMPORTANCE THAT, IN DISPOSING OF THE QUASI-JUDICIAL ISSUES BEFORE THEM REVENUE OFFICERS ARE BOUND BY THE DECISIONS OF THE APPELLATE AUTHORITIES. THE ORDER OF THE APPELLATE COLLECTOR I S BINDING ON THE ASSISTANT COLLECTORS WORKING WITHIN HIS JURISDICTIO N AND THE ORDER OF THE TRIBUNAL IS BINDING UPON THE ASSISTANT COLLECTO RS AND THE APPELLATE COLLECTORS WHO FUNCTION UNDER THE JURISDI CTION OF THE TRIBUNAL. THE PRINCIPLES OF JUDICIAL DISCIPLINE REQ UIRE THAT THE ORDERS OF THE HIGHER APPELLATE AUTHORITIES SHOULD BE FOLLO WED UNRESERVEDLY BY THE SUBORDINATE AUTHORITIES. THE MERE FACT THAT THE ORDER OF THE APPELLATE AUTHORITY IS NOT ACCEPTABLE TO THE DEPA RTMENTIN ITSELF AN OBJECTIONABLE PHRASEAND IS THE SUBJECT-MATTER OF A N APPEAL CAN FURNISH NO GROUND FOR NOT FOLLOWING IT UNLESS ITS O PERATION HAS BEEN SUSPENDED BY A COMPETENT COURT. IF THIS HEALTHY RUL E IS NOT FOLLOWED, ITA NO. 404, 406 & 404/AGRA/2012 29 THE RESULT WILL ONLY BE UNDUE HARASSMENT TO ASSESSE ES AND CHAOS IN ADMINISTRATION OF TAX LAWS. XV) DURING THE COURSE OF ASSESSMENT PROCEEDINGS ALL CREDIBLE EVIDENCES WERE FURNISHED BEFORE THE ASSESSING OFFIC ER ESTABLISHING THE CASE OF THE ASSESSEE ON MERITS. HOWEVER, TILL THE C ONCLUSION OF THE ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER HAS NO T BEEN ABLE TO DISCREDIT ANY OF THE EVIDENCES BROUGHT ON RECORD. A DDITION HAS BEEN MADE WITHOUT ANY IOTA OF EVIDENCES DISCREDITING THE EVIDENCE FURNISHED BY THE ASSESSEE. TO SUM UP THE SUBMISSION AND THE ISSUE BEFORE YOUR GOODSELF:- I) ADDITION MADE WITHOUT CONFRONTING WITH THE STATE MENT, MENTIONED REFERRED AND RELIED IN THE ASSESSMENT ORD ER AND WITHOUT ALLOWING OPPORTUNITY OF CROSS EXAMINATION IS BAD ON FACTS AND IN LAW. II) ADDITION HAS BEEN MADE MERELY ON THE SO CALLED SATISFACTION OF THE DEPARTMENT. III) ADDITION BEING BASED ON, AS MENTIONED IN THE A SSESSMENT ORDER, SOME BLACK DAIRY, THE TRANSACTION NOTED THER EIN WHICH ALSO AS PER ASSESSMENT ORDER DOES NOT PERTAIN TO THE YEAR U NDER CONSIDERATION. IV) EVIDENCES/DOCUMENTS BROUGHT ON RECORD WERE SUFF ICIENT ENOUGH TO DISCHARGE THE BURDEN THAT LAY UPON THE ASSESSEE IN TERMS OF DEEMING PROVISION OF SECTION 68 OF THE ACT. ON THE BASIS OF SUCH EVIDENCE THE COURTS THROUGHOUT THE COUNTRY AS WELL AS HONBLE APEX COURT IN PLETHORA OF CASES HAS HELD ACCORDINGLY AS REFERRED ABOVE. V) NO ADDITION IS CALLED FOR AS NOT ONLY THE IDENTI TY OF THE SUBSCRIBER COMPANY IS FULLY PROVED ON THE BASIS OF EVIDENCE BROUGHT ON RECORD BUT THE CREDITWORTHINESS AND GENUINENESS IS ALSO PROVED THOUGH NOT REQUIRED IN THE CASE WHERE THE ASSESSEE HAS TO DISCHARGE THE ONUS U/S 68 OF THE ACT IN THE CASE OF RECEIPT O F SHARE CAPITAL. IT IS REQUESTED THAT THE APPEAL MAY KINDLY BE ALLO WED AS SUBMITTED ABOVE AND AS CLAIMED IN GROUNDS OF APPEAL. 6.1 THE REMAND REPORTS OF THE AO ON THE SUBMISSIONS MADE THE BY LD. AR FOR BOTH THE YEARS ARE IDENTICAL EXCEPT THE NAMES OF TH E SHAREHOLDERS AND THE AMOUNTS. THUS, TO AVOID DUPLICATION REMAND REPORT PERTAINING TO A.Y. 2007-08 IS ONLY BEING REPRODUCED HERE AS UNDER: ITA NO. 404, 406 & 404/AGRA/2012 30 PARA 4 ADDITION OF RS.8,50,00,000 MADE U/S.68 OF THE ACT. IT IS SUBMITTED THAT THE ADDITION OF RS.8,50,00,000 RECEIVED AS SHARE APPLICATION MONEY DURING THE YEAR WAS RIGHTLY MADE IN THE HANDS OF THE ASSESSEE COMPANY AS THE ASSESSEE WAS NOT ABLE T O PROVE THE GENUINENESS AND CREDITWORTHINESS OF M/S.KMC PORTFOL IO PVT. LTD., DELHI. DURING THE COURSE OF SURVEY PROCEEDINGS IN THE OFFI CE PREMISES OF SHRI ASEEM GUPTA, CA A BLACK DIARY WAS FOUND THE IMPOUND ED. AS PER YOUR KIND DIRECTIONS A COPY OF BLACK DIARY IMPOUNDE D FROM THE OFFICE OF SHRI ASEEM GUPTA, DELHI AND STATEMENT OF SHRI A SEEM GUPTA DELHI RECORDED DURING THE COURSE OF SURVEY PROCEEDINGS U/ S.133A OF THE I.T.ACT, 1961 WERE OBTAINED. A COPY OF THE SAME WAS HANDED OVER TO THE ASSESSEE FOR CONFRONTATION. THE ASSESSEE HAS S UBMITTED VIDE HIS REPLY DATED 16.04.2012 THAT DURING THE ASSESSMENT P ROCEEDINGS U/S.153A THESE WERE NOT PROVIDED TO HIM INSPITE OF REPEATED REQUESTS. IT MAY BE SUBMITTED THAT AT THE TIME ASSESSMENT PRO CEEDINGS SHRI ASEEM GUPTA DELHI WAS SUMMONED FOR CONFRONTATION WI TH THE ASSESSEE BUT DUE TO SHORTAGE OF TIME AND INVOLVEMEN T OF SHRI ASEEM GUPTA IN TIME BARRING ASSESSMENTS AT DELHI HE COULD NOT COME TO AGRA FOR CONFRONTATION. NOW THE ASSESSEE HAS POINTED OU T THE SHORTCOMINGS IN THE STATEMENT OF SHRI ASEEM GUPTA AND HAS AGAIN REQUESTED TO PROVIDE OPPORTUNITY OF CROSS EXAMINATION OF SHRI AS EEM GUPTA. AS DIRECTED BY YOUR HONOUR SUMMONS U/S.131(1) OF TH E ACT WAS ISSUED TO SHRI ASEEM GUPTA CA FIXING THE DATE FOR CONFRONT ATION ON 30.04.2012 AT 11AM BUT AGAIN HE DID NOT ATTENDED AN D HAS SENT A WRITTEN SUBMISSIONS DATED 27.04.2012 (COPY ENCLOSED ) STATING AS UNDER: IN THIS REGARD IT IS SUBMITTED THAT AS PER THE BES T OF MEMORY UNDERSIGNED HAS NOT MADE ANY TRANSACTION DURING A.Y . 2004-05 TO 2010-11 WITH ANY VACMET GROUPS, AGRA OR OTHER ME ANS HE HAS NO KNOWLEDGE ABOUT THE SAID GROUPS. FURTHER IF YOUR GOODSELF POSSESSED ANY SPECIFIC INFORMATION, WHICH INDICATES MY CONNECTION WITH THE ABOVE GROUPS, MAY KINDLY BE PROVIDED TO THE UNDERSIGNED, SO THAT COMPLIANCE THEREOF MAY BE MADE TO YOUR OFFICE FOR EARLY DISPOSAL OF THE PROCEEDINGS I F ANY PENDING BEFORE YOUR GOODSELF. FURTHER UNDERSIGNED IS THE PR ACTICING CHARTERED ACCOUNTANT AND POSSIBILITY OF ANY TRANSAC TION WITH ITA NO. 404, 406 & 404/AGRA/2012 31 THE ABOVE GROUPS BY MY ANY CLIENT CANNOT BE RULED O UT. HOWEVER, IT IS AGAIN SURE AND CONFIRM THAT I HAVE N OT DONE ANY TRANSACTION DIRECTLY WITH THE ABOVE GROUPS DURING A .Y. 2004-05 TO 2010-11. HENCE, WITHOUT EXACT DETAILS OF TRANSAC TION UNDERSIGNED IS UNABLE TO SUBMIT ANY INFORMATION AND ALSO THER IS NO USE TO APPEAR BEFORE YOUR GOODSELF WITHOUT AN Y DOCUMENTS, AS YOUR SUMMONS IS ALSO NOT CONTAINED AN Y SPECIFIC LIST OF DOCUMENTS REQUIRED FOR DISPOSAL OF THE ABOV E PROCEEDINGS. IN THE LIGHT OF ABOVE SUBMISSION YOU ARE REQUESTED TO KINDLY TAKE INTO CONSIDERATION THE ABO VE SUBMISSION PLACE THE SAME ON RECORD, EITHER WITHDRA W THE SUMMONS ISSUED AGAINST ME OR PROVIDE ME THE DETAIL / DOCUMENTS POSSESSED BY YOUR GOODSELF INDICATING THE TRANSACTION DONE BY ME WITH THE ABOVE GROUPS DURING A.Y. 2004-05 TO 2010-11. FROM THE ABOVE SUBMISSIONS SHRI ASEEM GUPTA CA AT D ELHI, IT APPEARS THAT HE IS AVOIDING APPEARANCE IN THIS OFFI CE FOR CONFRONTATION AS DURING HIS STATEMENT AT DELHI HE HAS STATED THAT HE HAS PROVIDED ENTRY OF SHARE APPLICATION MONEY TO THE VACMET GROU P AND NOW HAS SHOWN HIS IGNORANCE. 6.2 IN THE REJOINDER TO THE REMAND REPORT, THE ASSE SSEE FURTHER SUBMITTED AS UNDER: 1.1 THE ASSESSING OFFICER IN THE REMAND REPORT AT P AGE 1 LAST PARA HAS MENTIONED THAT THE ADDITION HAS BEEN RIGHT LY MADE AS THE ASSESSEE WAS NOT ABLE TO PROVE THE GENUINENESS AND CREDITWORTHINESS OF THE COMPANIES FROM WHOM SHARE CAPITAL HAS BEEN R ECEIVED. 1.2 IN THIS REGARD IT IS SUBMITTED THAT DETAILED SU BMISSION HAS ALREADY BEEN FILED BEFORE YOUR GOODSELF VIDE WRITTE N SUBMISSION DATED 29.03.2012 FROM WHICH IT IS CONCLUSIVELY PROVED THA T THE ASSESSEE FULLY DISCHARGE HIS ONUS OF PROVING THE GENUINENESS AND C REDITWORTHINESS WHICH CAST UPON THE ASSESSEE AS PER THE PROVISIONS OF SECTION 68 OF THE ACT. ITA NO. 404, 406 & 404/AGRA/2012 32 1.3 ASSESSEE COMPANY ONCE AGAIN WISH TO INVITE YOUR GOODSELF KIND ATTENTION TO THE DOCUMENT FILED BEFORE THE ASSESSIN G OFFICER, THE ENQUIRIES MADE BY THE ASSESSING OFFICER AND THE SUB MISSION MADE, THOUGH THE SAME HAS ALREADY BEEN FILED IN THE WRITT EN SUBMISSION DATED 29.03.2012 FILED BEFORE YOUR GOODSELF:- I) KINDLY REFER PAGE 7 OF WRITTEN SUBMISSION PARA 4 .3 (III) II) KINDLY REFER PAGE 8 OF WRITTEN SUBMISSION PARA 4.5 III) KINDLY REFER PAGE 9 OF WRITTEN SUBMISSION PARA 4.6, 4.7 AND 4.8 IV) KINDLY REFER PAGE 10 OF WRITTEN SUBMISSION PAR A 4.12 2. RE: BLACK DAIRY 2.1 AS PER THE DIRECTION OF YOUR GOOSELF, COPY OF O NE PAGE OF BLACK DAIRY AND COPY OF THREE STATEMENT OF MR. ASSEM GUPT A HAS BEEN GIVEN BY THE ASSESSING OFFICER THOUGH THE SAME WERE NOT P ROVIDED DURING THE COURSE OF ASSESSMENT PROCEEDINGS U/S 153A OF TH E ACT INSPITE OF REPEATED REQUEST MADE SEVERAL TIMES. 2.2 THAT BEFORE MAKING THE SUBMISSION ON THE STATEM ENT OF SHRI ASEEM GUPTA AND ON THE PAGE GIVEN FROM BLACK DAIRY, AS PER THE ASSESSING OFFICER, WE WOULD LIKE TO DRAW YOUR GOODS ELF KIND ATTENTION TO THE IMPORTANT FACTS:- I) THAT RIGHT FROM THE DATE OF SEARCH TILL THE ASSE SSMENT IS COMPLETED THE ASSESSEE ON BEING ASKED REPEATEDLY EI THER BY THE SEARCH OFFICER OR BY THE ASSESSING OFFICER SUBMITTE D THAT THE ASSESSEE COMPANY OR ITS DIRECTORS HAS NEITHER ANY R ELATIONSHIP WITH SHRI ASEEM GUPTA NOR THE DIRECTOR OF THE COMPA NIES EVEN KNOW WHO IS SHRI ASEEM GUPTA NOR THERE ARE ANY TRAN SACTION EITHER OF THE ASSESSEE COMPANY OR OF ITS DIRECTORS WITH THIS PERSON NAMED SHRI ASEEM GUPTA. II) THAT VIDE WRITTEN SUBMISSION DATED 19.12.2011FI LED BEFORE THE ASSESSING OFFICER SPECIFIC REQUEST WAS M ADE THAT IF THERE IS ANY ADVERSE OR CONTRARY EVIDENCE AGAINST T HE ASSESSEE COMPANY IN THE POSSESSION OF THE ASSESSING OFFICER THEN KINDLY PROVIDE US THE COPY OF THE SAME IN CASE OF DOCUMENT ARY EVIDENCE SO THAT WE CAN REBUT THE SAME AND AN OPPOR TUNITY TO CROSS EXAMINE MAY ALSO BE PROVIDED IN VIEW OF NATUR AL JUSTICE ITA NO. 404, 406 & 404/AGRA/2012 33 IN THE CASE OF PERSONAL STATEMENT OF ANY PERSON AGA INST THE FACTS SUBMITTED BY US. III) FURTHER SHRI DINESH CHAND AGARWAL MANAGING DIR ECTOR OF THE ASSESSEE COMPANY IN HIS STATEMENT RECORDED B Y THE ASSESSING OFFICER DURING THE COURSE OF ASSESSMENT P ROCEEDINGS U/S 153A OF THE ACT ON 21.12.2011 CLEARLY STATED TH AT HE DOES NOT KNOW SHRI ASEEM GUPTA NOR HE/OR ASSESSEE COMPAN Y HAS ANY TRANSACTION WITH SHRI ASEEM GUPTA AND FURTHER S PECIFIC REQUEST WAS MADE TO PROVIDE OPPORTUNITY OF CROSS EX AMINATION OF SHRI ASEEM GUPTA. IV) THAT BEFORE THE COMPLETION OF ASSESSMENT U/S 15 3A OF THE ACT THE ASSESSING OFFICER NEITHER PROVIDED THE STAT EMENT OF SHRI ASEEM GUPTA AND THE SO CALLED BLACK DAIRY NOR OPPOR TUNITY OF CROSS EXAMINATION WAS ALLOWED WHICH CLEARLY VIOLATE S THE PRINCIPLE OF NATURAL JUSTICE AS THE ADDITION IN THE ASSESSMENT ORDER IS ENTIRELY BASED ON THE STATEMENT OF SHRI AS EEM GUPTA AND THE SO CALLED BLACK DAIRY IGNORING THE FACTS OF THE CASE AND THE DOCUMENT FILED BEFORE YOUR GOODSELF. IT IS NOT OUT OF PLACE BUT RATHER IMPORTANT TO MENTION HERE THAT BEFORE MA KING ADDITION U/S 68 OF THE ACT, NO SHOW CAUSE NOTICE WA S GIVEN BY THE ASSESSING OFFICER EITHER IN THE ORDER SHEET OR BY WAY OF SEPARATE NOTICE AS REGARDS THE ASSESSING OFFICER IN TENTION OF MAKING ADDITION. THUS NO OPPORTUNITY WAS PROVIDED T O THE ASSESSEE COMPANY. 2.3 COPY OF THREE STATEMENTS OF SHRI ASEEM GUPTA HA S BEEN PROVIDED. TWO STATEMENT ARE DATED 26.03.2010, ONE R ECORDED AT 9:15 A.M, PLACE NOT MENTIONED WHERE THIS STATEMENT HAS B EEN RECORDED. ANOTHER STATEMENT DATED 26.03.2010 RECORDED AT 2D, DDA FLATS, GULABI BAGH, NEW DELHI. THIS STATEMENT IS TYPED STA TEMENT WHEREAS THE STATEMENT RECORDED BY THE OFFICER OF THE DEPART MENT IS ALWAYS HAND WRITTEN. THIRD STATEMENT IS DATED 22.04.2010 R ECORDED BY THE ADIT, INTELLIGENCE WING, NEW DELHI AT HIS OFFICE IS ALSO TYPED STATEMENT. ON PERUSAL OF THIS STATEMENT WHICH IS TA KEN AFTER ONE MONTH BY THE INTELLIGENCE WING IT SEEMS THAT THE STATEMEN T HAS BEEN RECORDED FORCEFULLY FOR ADMISSION BY SHRI ASEEM GUPTA TO HAV E PROVIDED ACCOMMODATION ENTRY TO M/S VACMET PACKAGING (INDIA ) PVT. LTD. TO JUSTIFY THE SEARCH ACTION IN THE CASE OF THE ASSESS EE COMPANY AS DURING ITA NO. 404, 406 & 404/AGRA/2012 34 THE COURSE OF SEARCH AT THE PREMISES OF ASSESSEE CO MPANY OR ITS DIRECTORS NO INCRIMINATING MATERIAL WAS FOUND FROM WHICH ANY ADVERSE OPINION CAN BE DRAWN. IN THE STATEMENT DATED 26.03.2010 RECORDED AT 9:15A .M A) SHRI ASEEM GUPTA AT PAGE 9 HAS STATED THAT I AM DIRECTOR IN CERTAIN COMPANIES, THE NAMES OF THE COMPANIES HAS B EEN MENTIONED IN THE STATEMENT IN WHICH ONE OF THE COMPANY NAME IS M /S GANPATI FINCAP SERVICES (P) LTD. THE ASSESSEE COMPANY DURIN G THE COURSE OF ASSESSMENT PROCEEDINGS ASKED THE PRESENT DIRECTOR O F M/S GANPATI FINCAP SERVICES (P) LTD. (INVESTOR COMPANY) ABOUT S HRI ASEEM GUPTA. THEY INFORMED THAT THE PERSON OF THE NAME SH RI ASEEM GUPTA HAS NEVER BEEN THE DIRECTOR OF M/S GANPATI FINCAP S ERVICES (P) LTD SINCE ITS INCORPORATION. B) NO WHERE IN THIS STATEMENT THE NAME OF M/S VACME T PACKAGINGS (INDIA) PVT. LTD AND M/S VACMET FINANCE & INVESTMEN T LTD HAS BEEN MENTIONED. C) THUS THIS STATEMENT IS NOT AT ALL RELEVANT TO TH E FACTS OF THE CASE OF THE ASSESSEE COMPANY AND NO ADVERSE INFERENCE CA N BE DRAWN FROM THIS STATEMENT. RE: STATEMENT DATED 26.03.2010 RECORDED AT SURVEY P ROCEEDINGS U/S 133A OF THE ACT. -------------------------------------------------- ------------------------------- A) NOTHING ADVERSE AGAINST THE ASSESSEE CAN BE DRAW N FROM THIS STATEMENT AS NO WHERE IN THIS STATEMENT NAME OF M/S VACMET PACKAGINGS (INDIA) PVT. LTD AND M/S VACMET FINANCE & INVESTMENT LTD IS MENTIONED. RE: STATEMENT RECORDED ON 22.04.2010 A) IN THIS STATEMENT SHRI ASEEM GUPTA HAS STATED TH AT ENTRY TOTALING RS. 5 CRORE HAS BEEN GIVEN BY MY COMPANIES EITHER M/S KMC PORTFOLIO (P) LTD OR M/S GANPATI FINCAP SERVICES (P ) LTD, THE DETAILS OF WHICH ARE GIVEN IN THE SEPARATE SHEET PROVIDED T O THE ASSESSEE. B) ON PERUSAL OF STATEMENT OF SHRI ASEEM GUPTA IN R EPLY TO THE NOTINGS MENTIONED IN THE SEPARATE SHEET IT IS VERY MUCH CLEAR THAT THE SAID STATEMENT IS WRONG, NOT APPLICABLE TO THE FACT S OF THE ASSESSEES ITA NO. 404, 406 & 404/AGRA/2012 35 CASE AND THE QUESTION ARISES, FOR THE FOLLOWING REA SONS, THAT UNDER WHY AND WHAT CIRCUMSTANCES HE HAS GIVEN SUCH STATEM ENT. I) SHRI ASEEM GUPTA WHO HAS STATED, AS PER THE DEPA RTMENT TO HAVE PROVIDED ACCOMMODATION ENTRY TO THE ASSESSE E COMPANY IS NOT THE DIRECTOR OF THE COMPANIES NAMED M/S KMC PORTFOLIO (P) LTD OR GANPATI FINCAP SERVICES (P) LTD THEN HOW AND WHY HE HAS STATED THE WORD MY COMPANIES. II) HE IS NOT SURE THAT FROM WHICH COMPANY THE AMOU NT HAS BEEN GIVEN ON THE DATES AS MENTIONED ON THE SEPARAT E SHEET AS IN HIS STATEMENT HE HAS STATED EITHER FROM M/S KMC PORTFOLIO (P) LTD OR M/S GANPATI FINCAP SERVICES (P) LTD. III) ON THE DATES MENTIONED IN THE SEPARATE SHEET N O AMOUNT HAS BEEN RECEIVED BY THE ASSESSEE COMPANY EITHER FR OM M/S KMC PORTFOLIO (P) LTD OR FROM M/S GANPATI FINCAP SE RVICES (P) LTD AS HAS BEEN STATED BY SHRI ASEEM GUPTA. THUS THIS STATEMENT IS WRONG AND NO ADVERSE INFEREN CE CAN BE DRAWN ON THIS STATEMENT. IV) THAT ON INSPECTION OF THE FILE IT IS SEEN THAT YOUR GOODSELF DURING THE COURSE OF ASSESSMENT PROCEEDINGS U/S 153 A OF THE ACT ISSUE NOTICE U/S 133(6) OF THE ACT TO SHRI ASEE M GUPTA IN RESPONSE TO WHICH HE SENT HIS SUBMISSION STATING TH AT I HAVE NOT DONE ANY SHARE TRANSACTION AS REGARDS PURCHASE AND SALE DURING THE CAPTION ASSESSMENT YEAR WITH THE COMPANY M/S VACMET PACKAGING (INDIA) PVT. LTD. 2.4 THAT IN THE REMAND REPORT AT PAGE 2 THE ASSESSI NG OFFICER HAS REPRODUCED THE CONTENTS OF THE LETTER DATED 27.04.2 012 SENT BY SHRI ASEEM GUPTA DIRECTLY TO THE ASSESSING OFFICER. ON P ERUSAL OF THE SAME IT WILL BE SEEN THAT AGAIN VIDE SAID LETTER HE HAS DENIED HAVING MADE ANY TRANSACTION WITH VACMET GROUP DURING A.Y. 2004- 05 TO 2010- 2011. THAT CONSIDERING THE OVERALL FACTS OF THE CAS E AS SUBMITTED ABOVE AND AS SUBMITTED VIDE WRITTEN SUBMISSION DATE D 29.03.2012 AND HIS SUBSEQUENT DENIAL OF HAVING ANY TRANSACTION WIT H VACMET GROUP, THE STATEMENT OF MR. ASEEM GUPTA RECORDED EARLIER N EITHER BE RELIED UPON NOR ANY ADVERSE INFERENCE CAN BE DRAWN. ITA NO. 404, 406 & 404/AGRA/2012 36 2.5 THAT WITHOUT PREJUDICE TO THE SUBMISSION MADE V IDE EARLIER WRITTEN SUBMISSION DATED 29.03.2012 AND AS MENTIONE D ABOVE IT IS FURTHER SUBMITTED THAT ON THE PAGE GIVEN FROM THE B LACK DAIRY, AS PER THE ASSESSING OFFICER, THE TRANSACTION NOTED DOES N OT RELATES TO THE YEAR UNDER CONSIDERATION. THE ASSESSING OFFICER DUR ING THE COURSE OF HEARING BEFORE YOUR GOODSELF HAS CONCEDED THIS FACT THAT THE TRANSACTION AS NOTED IN THE IMPUGNED PAGE RELATES T O F.Y. 2004-05 AND THE ADDITION IN THE YEAR UNDER CONSIDERATION HA S BEEN SOLELY MADE ON THE BASIS OF THIS PAGE FROM THE BLACK DAIRY. 6.3 THE LD. CIT(A), CONSIDERING THE SUBMISSIONS OF THE ASSESSEE IN THE LIGHT OF THE MATERIAL ON RECORD DELETED BOTH THE ADDITIONS I N BOTH THE ASSESSMENT YEARS AND ALLOWED THE APPEALS OF THE ASSESSEE. THE FINDINGS O F THE LD. CIT(A) IN THE APPELLATE ORDER IN PARA 3.4 ARE REPRODUCED AS UNDER : 3.4 I HAVE GONE THROUGH THE ASSESSMENT ORDERS, SUB MISSIONS MADE BY THE LD. AR, REMAND REPORT OF THE AO AND THE COUNTER COMMENTS OF THE LD. AR ON THE REMAND REPORTS OF THE AO. TO PROVE THE GENUINENESS OF THE AMOUNTS RECEIVED ON ACCOUNT OF ALLOTMENT OF SHARES TO THE FOLLOWING COMPANIES I.E. (I) M/S.KMC PORTFOLIO LTD. - RS.8,50,00,000 FOR A.Y. 2007-08 AND (II) M/S.GANPAT I FINCAP SERVICES (P) LTD., DELHI RS.5 CRORE FOR A.Y. 2008 -09 THE ASSESSEE HAD FILED THE FOLLOWING DOCUMENTS IN SUPPORT OF ITS CLAIM DURING THE ASSESSMENT PROCEEDINGS : (I) SHARE APPLICATION FORMS (II) COPIES OF BANK ACCOUNT OF SHARE APPLICANTS (III) COPIES OF I.T. RETURNS OF THE SHARE ALLOTTEES ALONGWITH THE BALANCE SHEETS. (IV) COPIES OF SHARE ALLOTMENT CERTIFICATES (V) COPIES OF BOARD RESOLUTION OF THE SHARE APPLICA NTS IT IS WELL SETTLED POSTION OF LAW THAT INITIAL BUR DEN LIES ON THE ASSESSEE TO EXPLAIN THE NATURE AND SOURCE OF THE SH ARE APPLICATION ITA NO. 404, 406 & 404/AGRA/2012 37 MONEY RECEIVED BY THE ASSESSEE. IT IS ALSO WELL SE TTLED THAT THE ASSESSEE HAS TO SATISFACTORILY ESTABLISH THE IDENTI TY OF THE SHAREHOLDERS, THE GENUINENESS OF THE TRANSACTION AND THE CREDITWO RTHINESS OF THE SHAREHOLDERS. THE INITIAL ONUS OF PROVING THESE ING REDIENTS WHICH LIES ON THE ASSESSEE IS NOT STATIC. ONCE THE ASSESSEE P ROVES THE IDENTITY OF THE SHARE APPLICANTS FURNISHING THEIR PANS AND COPI ES OF BANK ACCOUNTS AND SHOWS THE GENUINENESS OF THE TRANSACTI ON BY SHOWING THAT MONEY IN THE BANKS IS BY ACCOUNT PAYEE CHEQUES OR BY DRAFT ETC. THEN THE ONUS TO PROVE THE TRANSACTION AS NON-GENUI NE WILL SHIFT TO THE DEPARTMENT. IN THE APPELLANTS CASE NO DISCREPANCY HAS BEEN POINTED OUT BY THE AO IN THE DOCUMENTS SUBMITTED BY THE ASS ESSEE NEITHER IN THE ASSESSMENT ORDER NOR IN THE REMAND REPORT SUBMI TTED DURING THE APPELLATE PROCEEDINGS. THE AO HAS HEAVILY RELIED O N THE STATEMENT OF SHRI ASEEM GUPTA MADE BY HIM ON 22.04.2010 BEFORE ADI(INTELLIGENCE)-III, NEW DELHI WHEREIN HE HAD STA TED WHEN CONFRONTED WITH ANNEXURE NO.20(BLACK DIARY) THAT TH ESE ENTRIES PERTAIN TO M/S.VACMET PACKAGING (INDIA) PVT. LTD. BUT, DURING THE ASSESSMENT PROCEEDINGS THE AO SENT A NOTICE TO SHRI ASEEM GUPTA U/S.133(6) OF THE ACT IN RESPONSE TO WHICH SHRI ASE EM GUPTA SENT A REPLY DATED 29.11.2011 STATING AS UNDER: THIS HAS REFERENCE TO YOUR NOTICE DATED 18.11.2011 RECEIVED ON 28.11.2011 IN CONNECTION WITH THE CAPTIONED SUBJ ECT WHEREIN YOUR GOODSELF HAS ASKED CERTAIN INFORMATION WITH RE GARD TO THE PURCHASE/ALLOTMENT OF SHARES WITH VACMET PACKAGING INDIA PVT. LTD. FOR A.Y. 2004-05 TILL 2010-11. IN THIS REGARD, I WOULD LIKE TO SUBMIT THAT I HAVE NOT DONE ANY SHARE TRANSACTIONS AS REGARDS PURCHASE AND SALE DUR ING THE CAPTIONED ASSESSMENT YERS WITH THE COMPANY M/S.VACM ET PACKAGING INDIA PVT. LTD., AND HENCE NO COPY OF ACC OUNT IS AVAILABLE AS SUCH. HOPE THE ABOVE CLARIFIES THE QUERRY RAISED BY YOUR GOODSELF VIDE THE SAID NOTICE. PLEASE LET ME KNOW IN CASE AN Y OTHER INFORMATION IS REQUIRED IN THIS BEHALF. THE NOTING MADE ON ANNEXURE A-20 (BLACK DIARY) ARE REPRODUCED AS UNDER: ITA NO. 404, 406 & 404/AGRA/2012 38 VACMET PACKAGING (INDIA) PVT. LTD. ANANT PLAZA, IIND FLOOR 4/117-2A, CIVIL LINES, CHURCH ROAD, AGRA 282002 10 + 90 332711 - 15.02.05 - 50,00,000 332701 - 15.02.05 - 50,00,000 332710 - 11.02.05 - 50,00,000 332724 - 18.02.05 - 25,00,000 75 - - - 25,00,000 203350 - 22.02.05 - 50,00,000 332712 - 22.02.05 - 50,00,000 332726 - 25.02.05 - 25,00,000 332713 - 3.3.05 - 50,00,000 332732 - 07.03.05 - 50,00,000 332714 - 11.03.05 - 50,00,000 332738 - 14.03.05 - 25,00,000 5,00,00,000 FROM THE ABOVE, IT IS CLEAR THAT THESE ENTRIES RELA TE TO A.Y. 2005-06 AND NOT TO THE YEARS UNDER CONSIDERATION I. E. A.Y. 2007-08 & 2008-09. DURING THE ASSESSMENT PROCEEDINGS U/S.153 A THE AO HAD ISSUED NOTICES U/S.133(6) TO BOTH THESE COMPANIES I .E. M/S.KMC PORTFOLIO (P) LTD. AND M/S.GANPATI FINCAP SERVICES (P) LTD. AND IN RESPONSE TO WHICH BOTH THESE COMPANIES HAD CONFIRME D THE INVESTMENTS MADE BY THEM AND THEY ALSO FILED SHARE RECEIPT CONFIRMATION, BANK STATEMENT OF THE RELEVANT PERIOD , INCOME-TAX RETURN ACKNOWLEDGEMENT AND BALANCE SHEET. BUT, THE AO HAS CHOSEN TO KEEP SILENT AND HAS OFFERED NO COMMENTS POINTING OUT ANY DEFECTS / LACUNAE IN THE EVIDENCES / DOCUMENTS FILED BY THE APPELLANT OR BY THE INVESTORS IN THE SHARES. NOTHING COMES OUT FROM THE READING OF THE ASSESSMENT ORDERS OR FROM THE REMAND REPORTS OF THE AO THAT AN YTHING INCRIMINATING WAS FOUND DURING THE SEARCH OF THE AS SESSEES PREMISES. THERE IS NOT EVEN A WHISPER TO THAT EFFECT IN THE A SSESSMENT ORDERS. SHRI D.C. AGGARWAL DIRECTOR OF THE COMPANY HAD ALON G BEEN DENYING IN HIS STATEMENT RECORDED DURING THE SEARCH AS WELL AS BEFORE THE AO THAT HE HAD NOT KNOWN SHRI ASEEM GUPTA AND HAD NO D EALINGS WITH HIM. THE AO HAS RELIED ON THE ENTRIES MADE IN THE BLACK DIARY (ANNEXURE -20), THE CONTENTS OF WHICH AS ALREADY ST ATED PERTAIN TO ITA NO. 404, 406 & 404/AGRA/2012 39 ASSESSMENT YEAR 2005-06. AS THE ASSESSEE WAS NOT C ONFRONTED WITH THE STATEMENT OF SHRI ASEEM GUPTA, KEEPING IN VIEW THE PRINCIPLES OF NATURAL JUSTICE, THE AO WAS DIRECTED TO GIVE A COPY OF STATEMENT OF SHRI ASEEM GUPTA TO THE APPELLANT AND IF IT WANTED TO CROSS EXAMINE SHRI ASEEM GUPTA AS WAS DEMANDED BEFORE THE AO ALSO DURING THE ASSESSMENT PROCEEDINGS THE SAME SHOULD BE ALLOWED. ACCORDINGLY, THE AO OBTAINED THE PHOTOCOPY OF THE BLACK DIARY AND ST ATEMENT OF SHRI ASEEM GUPTA FROM ACIT, CENTRAL CIRCLE-9, NEW DELHI THAT GOES TO SHOW THAT AT THE TIME OF ASSESSMENT THE AO WAS NOT IN POSSESSION OF PHOTOCOPIES OF BLACK DIARY AS WELL AS STATEMENT OF SHRI ASEEM GUPTA. THE AO ISSUED SUMMONS U/S.131 TO SHRI ASEEM GUPTA F OR PROVIDING OPPORTUNITY OF CROSS EXAMINATION TO THE APPELLANT. IN RESPONSE TO THE SUMMONS ISSUED SHRI ASEEM GUPTA WROTE A LETTER DATE D 27.04.2012 STATING AS UNDER: IN THIS REGARD IT IS SUBMITTED THAT AS PER THE BES T OF MEMORY UNDERSIGNED HAS NOT MADE ANY TRANSACTION DURING A.Y . 2004-05 TO 2010-11 WITH ANY VACMET GROUPS, AGRA OR OTHER ME ANS HE HAS NO KNOWLEDGE ABOUT THE SAID GROUPS. FURTHER IF YOUR GOODSELF POSSESSED ANY SPECIFIC INFORMATION, WHICH INDICATES MY CONNECTION WITH THE ABOVE GROUPS, MAY KINDLY BE PROVIDED TO THE UNDERSIGNED, SO THAT COMPLIANCE THEREOF MAY BE MADE TO YOUR OFFICE FOR EARLY DISPOSAL OF THE PROCEEDINGS I F ANY PENDING BEFORE YOUR GOODSELF. FURTHER UNDERSIGNED IS THE PR ACTICING CHARTERED ACCOUNTANT AND POSSIBILITY OF ANY TRANSAC TION WITH THE ABOVE GROUPS BY MY ANY CLIENT CANNOT BE RULED O UT. HOWEVER, IT IS AGAIN SURE AND CONFIRM THAT I HAVE N OT DONE ANY TRANSACTION DIRECTLY WITH THE ABOVE GROUPS DURING A .Y. 2004-05 TO 2010-11. HENCE, WITHOUT EXACT DETAILS OF TRANSAC TION UNDERSIGNED IS UNABLE TO SUBMIT ANY INFORMATION AND ALSO THERE IS NO USE TO APPEAR BEFORE YOUR GOODSELF WITHOUT AN Y DOCUMENTS, AS YOUR SUMMONS IS ALSO NOT CONTAINED AN Y SPECIFIC LIST OF DOCUMENTS REQUIRED FOR DISPOSAL OF THE ABOV E PROCEEDINGS. IN THE LIGHT OF ABOVE SUBMISSION YOU ARE REQUESTED TO KINDLY TAKE INTO CONSIDERATION THE ABO VE SUBMISSION PLACE THE SAME ON RECORD, EITHER WITHDRA W THE SUMMONS ISSUED AGAINST ME OR PROVIDE ME THE DETAIL / DOCUMENTS POSSESSED BY YOUR GOODSELF INDICATING THE TRANSACTION DONE BY ME WITH THE ABOVE GROUPS DURING A.Y. 2004-05 TO 2010-11. ITA NO. 404, 406 & 404/AGRA/2012 40 THUS, IT WILL BE SEEN THAT SHRI ASEEM GUPTA HAS CO NTRADICTED HIS OWN STATEMENT DATED 22.04.2010 BY STATING THAT HE H AS NOT ENTERED INTO ANY TRANSACTION WITH THE ASSESSEE. THE ASSESS EE COULD ALSO NOT BE PROVIDED WITH THE OPPORTUNITY OF CROSS-EXAMINING SH RI ASEEM GUPTA. IN THE CASE OF KISHANCHAND CHELLARAM VS. CIT (125 I TR 137 ) MAD (1) IT HAS BEEN HELD THAT THOUGH THE PROCEEDINGS BEFORE THE I.T. AUTHORITIES ARE NOT GOVERNED BY THE STRICT RULES OF EVIDENCE, H OWEVER, BEFORE THE I.T. AUTHORITITES COULD RELY UPON A PIECE OF EVIDEN CE, THEY WERE BOUND TO PRODUCE IT BEFORE THE ASSESSEE SO THAT THE ASSES SEE COULD CONTROVERT THE STATEMENTS CONTAINED IN IT BY ASKING FOR AN OPP ORTUNITY TO CROSS EXAMINE THE PERSON WITH REFERENCE TO STATEMENT MADE BY HIM. AS THE APPELLANT HAS NOT BEEN GIVEN THE OPPORTUNITY TO CRO SS-EXAMINE SHRI ASEEM GUPTA WHO IS DEPARTMENTS WITNESS COUPLED WIT H THE FACT THAT HE HAS CONTRADICTED HIS OWN STATEMENT DATED 22.04.2 010 ATLEAST ON TWO OCCASIONS AS STATED ABOVE, THEREFORE, THE STATE MENT MADE ON 22.04.2010 LOOSES ITS EVIDENCIARY VALUE AND CANNOT BE USED AGAINST THE APPELLANT FOR MAKING THE ADDITION. NOW COMING TO THE PERTINENT QUESTION AS TO WHAT KIND OF PROOF IS REQUIRED TO BE SUBMITTED BY THE ASSESSEE TO DISCHARGE ITS ONUS TO PROVE THE GENUINE NESS OF CREDITS AS APPEARING IN ITS BOOKS OF ACCOUNTS, THE HONBLE DEL HI HIGH COURT IN THE CASE OF DIVINE LEASING & FINANCE LTD. 207 CTR ( DEL.) 38 HELD AS UNDER:- 15. THERE CANNOT BE TWO OPINIONS ON THE ASPECT THA T THE PERNICIOUS PRACTICE OF CONVERSION OF UNACCOUNTED MO NEY THROUGH THE MASQUERADE OR CHANNEL OF INVESTMENT IN THE SHARE CAPITAL OF A COMPANY MUST BE FIRMLY EXCORIATED BY T HE REVENUE. EQUALLY, WHERE THE PREPONDERANCE OF EVIDENCE INDICA TES ABSENCE OF CULPABILITY AND COMPLEXITY OF THE ASSESS ED IT SHOULD NOT BE HARASSED BY THE REVENUES INSISTENCE THAT IT SHOULD PROVE THE NEGATIVE. IN THE CASE OF A PUBLIC ISSUE, THE C OMPANY CONCERNED CANNOT BE EXPECTED TO KNOW EVERY DETAIL P ERTAINING TO THE IDENTITY AS WELL AS FINANCIAL WORTH OF EACH OF ITS SUBSCRIBERS. THE COMPANY MUST, HOWEVER, MAINTAIN A ND MAKE AVAILABLE TO THE AO FOR HIS PERUSAL, ALL THE INFORM ATIONS CONTAINED IN THE STATUTORY SHARE APPLICATION DOCUME NTS. IN THE CASE OF PRIVATE PLACEMENT THE LEGAL REGIME WOULD NO T BE THE SAME. A DELICATE BALANCE MUST BE MAINTAINED WHILE WALKING THE TIGHT-ROPE OF SS.68 AND 69 OF THE I.T. ACT. THE BU RDEN OF PROOF ITA NO. 404, 406 & 404/AGRA/2012 41 CAN SELDOM BE DISCHARGED TO THE HILT BY THE ASSESSE D; IF THE AO HARBOURS DOUBTS OF THE LEGITIMACY OF ANY SUBSCRIPTI ON HE IS EMPOWERED, NAY DUTY-BOUND, TO CARRY OUT THOROUGH INVESTIGATIONS. BUT, IF THE AO FAILS TO UNEARTH AN Y WRONG OR ILLEGAL DEALINGS, HE CANNOT OBDURATELY ADHERE TO HI S SUSPICIONS AND TREAT THE SUBSCRIBED CAPITAL AS THE UNDISCLOSED INCOME OF THE COMPANY. IN THE CASE OF CIT VS. SOPHIA FINANCE LTD. 113 CTR (DEL.) FB 472, THE HONBLE DELHI HIGH COURT HELD THAT IF THE EXPLANATION PREFERRED BY THE ASSESSEE IS FOUND NOT TO BE SATISF ACTORY, FURTHER ENQUIRIES CAN BE MADE BY THE AO HIMSELF, BOTH IN RE GARD TO THE NATURE AND THE SOURCE OF THE SUM CREDITED BY THE ASSESSEE IN ITS BOOKS OF ACCOUNTS, SINCE THE WORDING OF SECTION 68 IS VERY W IDE. THE FULL BENCH ALSO OPINED THAT IF THE SHAREHOLDERS EXIST TH EN, POSSIBLY NO FURTHER ENQUIRY NEED BE MADE. THE HONBLE SUPREME COURT IN THE CASE OF LOVELY EXPORTS (P) LTD. 216 CTR (SC) 195 WHILE D EALING WITH THE ISSUE OF SHARE CAPITAL, THOUGH IN BRIEF HELD AS UND ER: 2. CAN THE AMOUNT OF SHARE MONEY BE REGARDED AS UNDISCLOSED INCOME UNDER S.68 OF I.T. ACT, 1961? WE FIND NO MERIT IN THIS SPECIAL LEAVE PETITION FOR THE SIMPLE REASON THAT IF THE SHARE APPLICATION MONEY IS RECEIVED BY THE ASSE SSEE COMPANY FROM ALLEGED BOGUS SHAREHOLDERS, WHOSE NAME S ARE GIVEN TO THE AO, THEN THE DEPARTMENT IS FREE TO PRO CEED TO REOPEN THEIR INDIVIDUAL ASSESSMENTS IN ACCORDANCE W ITH LAW. HENCE, WE FIND NO INFIRMITY WITH THE IMPUGNED JUDGEMENT.. NOW COMING TO THE QUESTION AS TO WHEN THE ASSESSEE HAS DISCHARGED ITS INITIAL BURDEN WHEN THE BALL AGAIN C AN BE THROWN INTO ASSESSEES COURT DEMANDING THE ASSESSEE TO GIVE SOM E MORE PROOFS, AS THE DOCUMENTS PRODUCED EARLIER BY THE ASSESSEE EITH ER BECOME SUSPECT OR ARE RENDERED INSUFFICIENT IN VIEW OF THE MATERIA L PRODUCED BY THE AO REBUTTING THE ASSESSEES DOCUMENTARY EVIDENCE. IN THIS REGARD, A USEFUL REFERENCE CAN BE MADE TO THE CASE OF CIT VS. KUNDAN INVESTMENT LTD. 182 CTR (CAL.) 608 WHEREIN THE HON BLE CALCUTTA HIGH COURT OBSERVED AS UNDER: ITA NO. 404, 406 & 404/AGRA/2012 42 .. UNDER S.68, THE ITO IS EMPOWERED TO LIFT THE VEIL OF CORPORATE IDENTITY AND FIND OUT AS TO WHETH ER THE APPARENT IS REAL. IT IS THE ASSESSEE ON WHOM THE O NUS LIES. UNLESS SUFFICIENT MATERIALS ARE PRODUCED, THE ONUS DOES NOT SHIFT ON THE REVENUE. BUT ONCE THE MATERIALS ARE S CRUTINIZED AND THE RESULT OF THE SCRUTINY IS COMMUNICATED TO T HE ASSESSEE, THE ONUS SHIFTS FROM THE REVENUE TO THE ASSESSEE. THEN THE ASSESSEE HAS TO TAKE APPROPRIATE STEPS FOR PROVING ITS CASE. UNLESS THERE ARE SUFFICIENT MATERIALS AFTER SUCH CO MMUNICATION, PRODUCED BY THE ASSESSEE, THE ITO CAN DO NO FURTHER . WITH THIS LEGAL POSITION AGAIN ADVERTING TO THE FA CTS OF THE CASE, IT IS A FACT THAT THE SHARE APPLICANTS ARE COMPANIE S INCORPORATED UNDER THE INDIAN COMPANIES ACT. AS THESE ARE INCOR PORATED UNDER THE COMPANIES ACT, ATLEAST ON PAPER THEIR IDENTITY IS E STABLISHED. HOWEVER, IT IS A MATTER OF RECORD THAT BOTH THESE C OMPANIES I.E. M/S.KMC PORTFOLIO (P) LTD. (A.Y. 2007-08)AND M/S.GA NPATI FINCAP SERVICES (P) LTD. HAVE CONFIRMED HAVING SUBSCRIBED THE SHARES IN RESPONSE TO NOTICE ISSUED BY THE AO DURING THE ASSE SSMENT PROCEEDINGS U/S.153A. IT IS ALSO UNCONTROVERTED FA CT THAT THESE COMPANIES HAVE PANS AND ARE FILING THEIR I.T. RETUR NS. THE APPELLANT WHICH HAS RECEIVED SHARE APPLICATION MONEY HAS PROD UCED DOCUMENTS IN THE FORM OF SHARE APPLICANT FORMS, SHARE ALLOTME NT LETTER, IT RETURNS, COPIES OF BANK ACCOUNTS THROUGH WHICH THE FUNDS WERE TRANSFERRED. THUS, THE ASSESSEE HAS DISCHARGED ITS ONUS. NO DISCREPANCY HAS BEEN POINTED OUT BY THE AO AT ANY S TAGE WITH REGARD TO DOCUMENTS / PROOF SUBMITTED BY THE ASSESSEE TO P ROVE ITS CASE. THUS, THE ONUS NEVER SHIFTED BACK TO THE ASSESSEE. AS REGARDS THE STATEMENT OF SHRI ASEEM GUPTA DATED 22.04.2010 WHER EIN HE HAD INDICTED M/S.VACMET PACKAGING (INDIA) LTD. OF HAVIN G RECEIVED ACCOMMODATION ENTRIES, I HAVE ALREADY HELD THAT IT HAS NO EVIDENCIARY VALUE. AS FAR AS CONTENTS OF ANNEXURE A-20 (BLACK DIARY) ARE CONCERNED THEY DONT PERTAIN TO THE ASSESSMENT YEAR S UNDER CONSIDERATION AS IS CLEAR FROM THE NOTINGS WHICH HA VE BEEN REPRODUCED ABOVE THAT THESE PERTAIN TO A.Y. 2005-06 AND THE SAME CANNOT BE MADE THE BASIS FOR MAKING ADDITIONS IN A. YRS. 2007-08 AND 2008-09. THUS KEEPING IN VIEW THE FACTS OF THE CAS E AND THE LEGAL POSITION AS DISCUSSED ABOVE, I HOLD THAT THE AO WAS NOT RIGHT IN MAKING THE ADDITIONS AND THE SAME ARE DELETED. ITA NO. 404, 406 & 404/AGRA/2012 43 7. THE LD. DR RELIED UPON THE ORDER OF THE AO AND R EFERRED TO THE STATEMENT OF SHRI ASEEM GUPTA, CHARTERED ACCOUNTANT RECORDED BY THE REVENUE AUTHORITIES, COPIES OF WHICH ARE FILED IN PAPER BOOK TO SHOW THA T SHRI ASEEM GUPTA, C.A. ADMITTED THAT HE CONTROLLED THE MANAGEMENT OF THE C OMPANIES FROM WHERE ACCOMMODATION ENTRIES HAVE BEEN GIVEN. PB-254 IS TH E COPY OF THE SEIZED BLACK DIARY, WHICH HAS POINTED OUT THE MODUS OPERANDI BY REFERRING TO 10 + 90. THOUGH SHRI ASEEM GUPTA DENIED HAVING ENTERED INTO THE TRA NSACTION IN HIS PERSONAL CAPACITY, BUT THE ENTIRE STATEMENT WOULD REVEAL THA T THE MODUS OPERANDI IS TO PROVIDE ACCOMMODATION ENTRIES. THE STATEMENT OF SHR I D.C. AGARWAL (MD OF THE ASSESSEE) WAS ALSO RECORDED BUT HE WAS NOT AWARE OF VARIOUS FUNCTIONING OF THE AGM AND MAINTENANCE OF RECORDS AND BOARDS RESOLUTI ON ETC. THE LD. DR REFERRED TO THE BALANCE SHEET FROM ITA NO. 404/AGRA/2012 TO SHOW THAT THERE WAS A NEGATIVE BALANCE SHEET AND THE PROFIT WAS MEAGER TH OUGH THE SHARE PREMIUM WAS RS.3.36 LACS IN EARLIER YEAR, BUT NOTHING IS CLARIF IED AS TO WHY M/S. KMC PORTFOLIO (P) LTD. MADE INVESTMENT IN SHARES IN A SUM OF RS.8 .50 CRORES. HE HAS SUBMITTED THAT THESE COMPANIES IN QUESTION WERE GIVING CHEQUE S ONLY OR FUNDS FROM OTHER COMPANIES. THEIR FINANCING CAPACITY IS NOT EXPLAINE D AND SINCE THE ASSESSEE IS THE BENEFICIARY, THEREFORE, THE ADDITION WAS RIGHTLY MA DE IN THE CASE OF THE ASSESSEE. THE LD. DR RELIED UPON THE DECISION OF HONBLE DELH I HIGH COURT IN THE CASE OF CIT VS. NOVA PROMOTERS AND FINLEASE PVT. LTD., 342 ITR 169, IN WHICH THE FINDINGS ITA NO. 404, 406 & 404/AGRA/2012 44 OF THE TRIBUNAL WERE BASED ON IRRELEVANT MATERIAL O R HAD BEEN ENTERED IGNORING RELEVANT MATERIAL. THEREFORE, ON CONSIDERATION OF T HE MATERIAL ON RECORD, THE ORDER OF THE TRIBUNAL IN DELETING THE ADDITION ON ACCOUNT OF SHARE CAPITAL WAS SET ASIDE AND THE DEPARTMENTAL APPEAL WAS ALLOWED. THE LD. DR SUBMITTED THAT EVEN IF DIARY WAS OBTAINED AT THE APPELLATE STAGE, BUT THIS WAS N OT THE SOLE BASIS FOR MAKING ADDITION AGAINST THE ASSESSEE. SIMILARLY, THE STATE MENT OF SHRI ASEEM GUPTA WAS THOUGH OBTAINED AT THE APPELLATE STAGE, BUT AGAIN T HE ADDITION IS NOT MADE SOLELY ON HIS STATEMENT, BUT ON THE BASIS OF INCRIMINATING MA TERIAL ON RECORD AND ON EXAMINATION OF THE APPRAISAL REPORT. THE ADDITIONS WERE MADE BECAUSE BOTH THE COMPANIES ARE ENTRY PROVIDING COMPANIES ONLY AS PER APPRAISAL REPORT AND THEIR BALANCE SHEET ONLY SHOWS THAT THEY WERE COMPANIES O N PAPERS. AFTER SEARCH, LOT OF MATERIAL CAME TO THE NOTICE OF THE DEPARTMENT. SO E VEN IF IN THE EARLIER YEAR IN THE CASE OF SISTER CONCERN, THE ORDER WAS PASSED U/S. 1 43(3) IS NOT ENOUGH TO DELETE THE ADDITION. THE STATEMENT OF SHRI DC AGARWAL DID NOT PROVIDE RELEVANT STATUTORY RECORDS, WOULD LEAD TO INFERENCE THAT RELEVANT MATE RIAL WAS NOT PRODUCED BEFORE THE AO TO DISCHARGE THE ONUS TO PROVE GENUINE TRANSACTI ON OF SHARE APPLICATION MONEY U/S. 68 OF THE IT ACT. 8. ON THE OTHER HAND, THE LD. COUNSEL FOR THE ASSES SEE REITERATED THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW, COPIES OF WHICH ARE FILED IN THE PAPER BOOK. HE ITA NO. 404, 406 & 404/AGRA/2012 45 HAS ALSO RELIED UPON ALL THE DECISIONS CITED BEFORE THE LD. CIT(A), COPIES OF WHICH ARE ALSO FILED IN THE PAPER BOOK. HE HAS REFERRED T O PB-254, WHICH IS COPY OF SEIZED DIARY TO SHOW THAT NO OTHER MATERIAL WAS FOUND DURI NG THE COURSE OF SEARCH AND ALL THE ENTRIES CONTAINED IN THE DIARY PERTAIN PRIOR TO MARCH, 2005. THEREFORE, THE SAME WOULD FALL IN ASSESSMENT YEAR 2005-06 AND DID NOT P ERTAIN ANYTHING TO ASSESSMENT YEARS UNDER APPEALS. THEREFORE, THE DIARY IS NOT RE LEVANT TO THE MATTER IN ISSUE. PB- 224 IS THE ORDER SHEET DATED 29.03.2012 OF THE OFFI CE OF CIT(A) IN WHICH THE CIT(A) DIRECTED THE AO TO CONFRONT THE CONTENTS OF BLACK DIARY TO THE ASSESSEE ALONG WITH STATEMENT OF SHRI ASEEM GUPTA AND ALSO D IRECTED TO PROVIDE RIGHT OF CROSS EXAMINATION TO THE ASSESSEE, BUT NO CROSS EXA MINATION WAS ALLOWED TO THE STATEMENT OF SHRI ASEEM GUPTA. PB-215 IS THE REMAND REPORT OF THE AO DATED 01.05.2012, IN WHICH HE HAS EXPLAINED THAT THE DIAR Y AND STATEMENT OF SHRI ASEEM GUPTA HAVE BEEN OBTAINED NOW, WHICH HAVE BEEN HANDE D OVER TO THE ASSESSEE FOR CONFRONTATION. IT WAS PROVED THAT THE AO OBTAINED T HE BLACK DIARY AND STATEMENT OF SHRI ASEEM GUPTA ONLY IN THE REMAND PROCEEDINGS SO THE SAME COULD NOT BE READ IN EVIDENCE AGAINST THE ASSESSEE AT THE ASSESSMENT STA GE. THE AO PASSED THE REGULAR ASSESSMENT ORDER U/S. 143(3) IN THE CASE OF THE SAM E ASSESSEE IN PRECEDING ASSESSMENT YEAR 2005-06 ON DATED 30.12.2011, BUT DI D NOT MAKE ANY ADDITION OF ANY UNEXPLAINED SHARE CAPITAL AGAINST THE ASSESSEE. THEREFORE, THE SEIZED DIARY AND STATEMENT OF SHRI ASEEM GUPTA WOULD NOT BE RELEVANT TO THE MATTER IN ISSUE. HE HAS ITA NO. 404, 406 & 404/AGRA/2012 46 FURTHER SUBMITTED THAT THERE WAS NO SHARE CAPITAL F ROM BOTH THESE COMPANIES IN ASSESSMENT YEAR 2005-06 WOULD ALSO PROVE THAT THE C ONTENTS OF THE DIARY WERE FABRICATED. PB-229 IS THE ORDER SHEET OF AO DATED 1 9.12.2011 WHERE THE AO HAS VERIFIED ALL THE FACTS OF SHARE CAPITAL AND THEREAF TER DID NOT PROVIDE ANY OPPORTUNITY TO THE ASSESSEE. THEREFORE, THE ADDITION IS UNJUSTI FIED. PB-219 IS THE EXPLANATION OF THE ASSESSEE BEFORE THE LD. CIT(A), IN WHICH IT WAS EXPLAINED THAT THE NAME OF THE ASSESSEE HAS NOT BEEN MENTIONED IN THE STATEMENT OF SHRI ASEEM GUPTA. THEREFORE, NONE OF THE STATEMENTS ARE RELEVANT TO THE MATTER I N ISSUE UNDER APPEALS. HE HAS SUBMITTED THAT THE AO ASKED THE EXPLANATION ABOUT T HE RELATIONSHIP OF ASSESSEE WITH SHRI ASEEM GUPTA, WHICH WAS DENIED. THE DETAILED RE PLY WAS FILED BEFORE THE LD. CIT(A) ON THE MATTER IN ISSUE FROM PB-7 ONWARDS TO SATISFY THAT THE ADDITION IS UNJUSTIFIED. SINCE NO RIGHT TO CROSS EXAMINATION HA S BEEN GIVEN TO THE STATEMENT OF ASEEM GUPTA, THEREFORE, IT COULD NOT BE READ IN EVI DENCE AGAINST THE ASSESSEE. PB- 195 IS THE ORDER SHEET DATED 14.12.2008 IN THE CASE OF SISTER CONCERN, M/S. VACMET FINANCE AND INVESTMENTS CO., AGRA (IN ITA NO. 404/A GRA/2012) AND IN THEIR ASSESSMENT FOR THE ASSESSMENT YEAR 2006-07, THE AO DID NOT MAKE SIMILAR ADDITION VIDE ORDER U/S. 143(3) DATED 29.12.2008. HE HAS SUB MITTED THAT THE FACTS ARE SAME IN THE CASE OF M/S. GANPATI FINCAP SERVICES PVT. LT D., IN WHICH SHARE APPLICATION FORMS ARE FILED IN PB-75 TO 88, BANK STATEMENT (PB- 89 TO 93), PB-95 IS SHARE CERTIFICATES, PB-97 TO 98 ARE THE REPLIES OF THE AS SESSEE. PB-99 IS CONFIRMATION BY ITA NO. 404, 406 & 404/AGRA/2012 47 SHARE APPLICANT AND PB-100 TO 103 ARE SHARE APPLICA TION FORMS. PB-125 TO 128 ARE THE DETAILS FURNISHED BEFORE THE REGISTRAR OF COMPA NIES. PB-152 IS THE NOTICE OF THE AO TO THE SHARE APPLICANTS U/S. 133(6), WHICH WAS D ULY REPLIED AND TRANSACTION WAS CONFIRMED DIRECTLY TO THE AO AND ALL CONFIRMATIONS, COPY OF BANK ACCOUNT AND SHARE CERTIFICATES WERE FILED TO PROVE THE GENUINEN ESS OF THE SHARE APPLICATION MONEY. SIMILAR CONFIRMATIONS WERE MADE IN THE CASE OF M/S. KMC PORTFOLIO LTD. U/S. 133(6) DIRECTLY TO THE AO ALONG WITH ALL THE D OCUMENTS. HE HAS, THEREFORE, SUBMITTED THAT THE LD. CIT(A) ON PROPER APPRECIATIO N OF FACTS AND MATERIAL ON RECORD RIGHTLY DELETED THE ADDITION. 9. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS, GONE T HROUGH THE MATERIAL ON RECORD. THE ASSESSEE HAD FILED ALL THE DOCUMENTARY EVIDENCES BEFORE THE AO IN ORDER TO PROVE THE GENUINE SHARE APPLICATION MONEY, I.E., SHARE APPLICATION FORMS, COPIES OF BANK ACCOUNTS OF SHARE APPLICANTS, COPIES OF IT RETURNS OF SHARE ALLOTTEES ALONG WITH THEIR BALANCE SHEETS, COPIES OF SHARE AL LOTMENT CERTIFICATES AND COPIES OF BOARDS RESOLUTION OF SHARE APPLICANTS. THUS, THE A SSESSEE PROVED THE IDENTITY OF THE SHARE APPLICANTS, WHICH IS SUPPORTED BY THE COP IES OF PAN AS WELL AS REGISTRATION WITH THE REGISTRAR OF COMPANIES. THE F INANCIAL CAPACITY IS PROVED BY FILING THE COPIES OF BANK ACCOUNTS FROM WHERE THE S HARE APPLICATION MONEY WAS TRANSFERRED THROUGH BANKING CHANNEL TO THE ASSESSEE . THE GENUINENESS OF THE ITA NO. 404, 406 & 404/AGRA/2012 48 TRANSACTION HAS BEEN ESTABLISHED BY FILING THE ENTI RE DOCUMENTS TO THE SATISFACTION OF THE AO AND FURTHER THE TRANSACTIONS HAVE BEEN CO NFIRMED BY BOTH THE COMPANIES BY FILING THEIR REPLIES BEFORE THE AO TO THE NOTICE S U/S. 133(6) OF THE IT ACT. THE AO HAS NOT POINTED OUT ANY DISCREPANCY IN THE DOCUM ENTS FILED BY THE ASSESSEE AND THE REPLIES FILED BY THE COMPANIES DIRECTLY TO THE AO U/S. 133(6) OF THE IT ACT. 9.1 THE DEPARTMENT HEAVILY RELIED UPON THE STATEMEN T OF SHRI ASEEM GUPTA, C.A. IN WHICH IN INITIAL STATEMENT, HE HAS NOT NAME D THE ASSESSEE AND LATER ON IT CAME ON RECORD THAT HIS STATEMENT WAS NEVER BROUGHT ON RECORD OF THE AO AT THE ASSESSMENT STAGE, WHICH WAS OBTAINED BY THE AO AS P ER THE DIRECTIONS OF THE LD. CIT(A) AT THE APPELLATE STAGE. THEREFORE, WHEN HIS STATEMENT WAS NOT BEFORE THE AO AT ASSESSMENT STAGE, THERE WAS NO REASON TO RELY UPON THE SAME STATEMENT AGAINST THE ASSESSEE FOR MAKING THE HUGE ADDITION. FURTHER, IT IS ESTABLISHED ON RECORD THAT WHEN THE STATEMENT OF SHRI ASEEM GUPTA WAS OBTAINED AT THE APPELLATE STAGE BY THE AO IN THE REMAND PROCEEDINGS, SHRI ASE EM GUPTA WAS NEVER PRODUCED BEFORE THE AO FOR CROSS EXAMINATION ON BEH ALF OF THE ASSESSEE. THEREFORE, HIS STATEMENT CANNOT BE READ IN EVIDENCE AGAINST THE ASSESSEE UNLESS THE ASSESSEE HAD BEEN GIVEN OPPORTUNITY TO CROSS EXAMIN E SHRI ASEEM GUPTA. THE AO ALSO CALLED EXPLANATION OF SHRI ASEEM GUPTA U/S. 13 3(6) AND SHRI ASEEM GUPTA FILED HIS REPLY DIRECTLY BEFORE THE AO AND DENIED T O HAVE EXECUTED ANY SHARE ITA NO. 404, 406 & 404/AGRA/2012 49 TRANSACTION BETWEEN THE ASSESSEE AND THE SHARE APPL ICANT COMPANIES. THEREFORE, IT COULD NOT BE TREATED AS HAVING ANY EVIDENTIARY VALU E AGAINST THE ASSESSEE FOR MAKING THE ADDITION. SIMILARLY, ANNEXURE A-20 (BLAC K DIARY) WAS NOT BEFORE THE AO AT THE ASSESSMENT STAGE WHICH WAS ALSO OBTAINED BY THE AO AT THE REMAND PROCEEDINGS, COPY OF WHICH IS FILED IN THE PAPER BO OK TO INDICATE THAT THE TRANSACTION RECORDED THEREIN PERTAINED TO FEBRUARY AND MARCH, 2005, WHICH IS RELEVANT TO THE ASSESSMENT YEAR 2005-06 ONLY. THE A SSESSEE IN HIS WRITTEN SUBMISSIONS CATEGORICALLY SUBMITTED THAT EVEN IN AS SESSMENT YEAR 2005-06, NO SHARE CAPITAL HAS BEEN RECEIVED FROM M/S. KMC PORT FOLIO PVT. LTD. AND M/S. GANPATI FINCAP SERVICES PVT. LTD., NOR ANY SUCH ADD ITION HAS BEEN MADE BY THE AO AGAINST THE ASSESSEE OF THE AMOUNT MENTIONED IN THE DIARY EVEN IN REGULAR ASSESSMENT U/S. 143(3)/153A OF THE IT ACT DATED 30. 12.2011 FOR ASSESSMENT YEAR 2005-06. THEREFORE, THE DIARY IS NOT RELEVANT TO TH E ASSESSMENT YEAR UNDER APPEALS, I.E., 2007-08 AND 2008-09. IT IS ALSO ESTABLISHED O N RECORD THAT DURING THE ASSESSMENT PROCEEDINGS, THE AO ISSUED NOTICE U/S. 1 33(6) TO BOTH THESE COMPANIES AND BOTH THE COMPANIES DIRECTLY CONFIRMED THE TRANS ACTION WITH THE ASSESSEE IN THEIR REPLY FILED BEFORE THE AO, WHICH IS SUPPORTED BY THEIR CONFIRMATIONS, BANK STATEMENTS, INCOME-TAX RETURNS AND THE BALANCE SHEE TS. NO OTHER INCRIMINATING MATERIAL ARE FOUND IN SEARCH AGAINST THE ASSESSEE. MERELY BECAUSE SHRI DC AGARWAL COULD NOT PROVIDE RELEVANT INFORMATION IN HIS STATE MENT, WOULD NOT BE A GROUND TO ITA NO. 404, 406 & 404/AGRA/2012 50 MAKE ADDITION AGAINST THE ASSESSEE REGARDING AGM AN D OTHER PROCEDURES OF THE ASSESSEE COMPANY. FURTHER, IN THE CASE OF SISTER CO NCERN M/S. VACMET FINANCE AND INVESTMENT LTD., THE AO PASSED ORDER U/S. 143(3) ON DATED 29.12.2008 FOR THE ASSESSMENT YEAR 2006-07 IN WHICH THE SHARE APPLICAT ION MONEY OF M/S. KMC PORTFOLIO PVT. LTD. HAVE BEEN ACCEPTED BY THE AO AF TER DUE VERIFICATION OF THE FACTS. THEREFORE, SIMILAR ADDITION COULD NOT BE MADE AGAIN ST THE ASSESSEE. CONSIDERING THE ENTIRE MATERIAL ON RECORD IN THE LIGHT OF FINDINGS OF AUTHORITIES BELOW, WE FIND THAT THE ASSESSEE HAS BEEN ABLE TO PROVE THAT BOTH THE S HARE APPLICANTS ARE COMPANIES INCORPORATED UNDER THE INDIAN COMPANIES ACT AND BOT H ARE ALSO ASSESSED TO TAX. THEREFORE, THEIR IDENTITY IS NOT IN DISPUTE. THEY H AVE FILED THEIR BANK ACCOUNTS AND BALANCE SHEETS WHERE ALL THE TRANSACTIONS HAVE BEEN RECORDED AND WERE ALSO REPORTED TO THE REGISTRAR OF COMPANIES. THERE WERE SUFFICIENT BANK BALANCES AVAILABLE IN THEIR BANK ACCOUNTS AND BOTH THESE COM PANIES CONFIRMED THE TRANSACTIONS WITH THE ASSESSEE DIRECTLY TO THE AO U /S. 133(6) OF THE IT ACT. THE ASSESSEE ALSO PRODUCED ON RECORD THAT THESE COMPANI ES FILED APPLICATIONS FOR ALLOTMENT OF SHARES AND ULTIMATELY, THE SHARES OF T HE ASSESSEE WERE ALSO ALLOTTED TO THEM ON MAKING INVESTMENT IN SHARES. THEREFORE, EVI DENCE AND MATERIAL ON RECORD CLEARLY PROVE THE IDENTITY OF BOTH THE SHARE APPLIC ANT COMPANIES, THEIR CREDITWORTHINESS AND GENUINENESS OF TRANSACTIONS IN THE MATTER. ALL THE DECISIONS CITED BY THE LD. COUNSEL FOR THE ASSESSEE BEFORE TH E LD. CIT(A) CLEARLY SUPPORT THE ITA NO. 404, 406 & 404/AGRA/2012 51 FINDINGS OF LD. CIT(A) IN DELETING THE ADDITION. TH E LD. CIT(A) WAS, THEREFORE, JUSTIFIED IN RELYING UPON THE DECISION OF HONBLE D ELHI HIGH COURT IN THE CASE OF DIVINE LEASING AND FINANCE LTD. (SUPRA) AND SOPHIA FINANCE LTD. (SUPRA) AND THE JUDGMENT OF HONBLE SUPREME COURT IN THE CASE OF LO VELY EXPORTS PVT. LTD. (SUPRA). THE LD. COUNSEL FOR THE ASSESSEE DURING TH E COURSE OF ARGUMENTS ALSO RELIED UPON THE ORDER OF ITAT, AGRA BENCH IN THE GROUP CAS ES OF M/S. LDK SHARES AND SECURITIES PVT. LTD. ETC. IN ITA NO. 355/AGRA/2010 ETC. VIDE ORDER DATED 20.10.2011 WHERE ON THE BASIS OF OVERWHELMING EVIDE NCES AS HAVE BEEN FURNISHED IN THE CASE OF PRESENT ASSESSEE, THE DEPARTMENTAL A PPEALS WERE DISMISSED. COPY OF THE ORDER IS PLACED ON RECORD. IT IS ALSO STATED TH AT THE SAID DECISION OF THE TRIBUNAL HAS BEEN CONFIRMED BY THE HONBLE ALLAHABAD HIGH CO URT IN GROUP CASES OF ITA NO. 487/AGRA/2012 VIDE ORDER DATED 05.04.2012. COPY OF THE JUDGMENT OF HONBLE HIGH COURT IS ALSO PLACED ON RECORD. IN VIEW OF THE ABOVE FACTS IN THE LIGHT OF JUDGMENTS CITED BEFORE THE LD. CIT(A) AND THE JUDGM ENT OF HONBLE JURISDICTIONAL HIGH COURT ABOVE, WE DO NOT FIND ANY INFIRMITY IN T HE ORDER OF THE LD. CIT(A) IN DELETING THE ADDITION IN BOTH THE ASSESSMENT YEARS UNDER APPEALS. THE FACTS IN THE CASE OF NOVA PROMOTERS AND FINLEASE PVT. LTD. (SUPR A) RELIED UPON BY THE LD. DR ARE CLEARLY DISTINGUISHABLE. IN THE PRESENT CASE BE FORE US, THE LD. CIT(A) HAD CONSIDERED ALL THE RELEVANT MATERIAL BEFORE ARRIVIN G AT THE JUST DECISION IN THE MATTER. THEREFORE, THE FINDINGS OF THE LD. CIT(A) C ANNOT BE FAULTED WITH. IN VIEW OF ITA NO. 404, 406 & 404/AGRA/2012 52 THE ABOVE DISCUSSION, WE DO NOT FIND ANY MERIT IN T HE DEPARTMENTAL APPEALS. THE SAME ARE, ACCORDINGLY, DISMISSED. IN THE RESULT, IT A NO. 405 & 406/AGRA/2012 ARE DISMISSED. ITA NO. 404/AGRA/2012 (ASSESSMENT YEAR : 2006-07): 10. THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF LD. CIT(A)-II, AGRA DATED 11.05.2012 FOR THE ASSESSMENT YEAR 2006- 07, CHALLENGING THE DELETION OF ADDITION OF RS.11 CRORES MADE ON ACCOUNT OF UNEX PLAINED CASH CREDITS U/S. 68 OF THE IT ACT. 11. BOTH THE PARTIES STATED THAT THE ISSUE IS SAME AS IS CONSIDERED IN ITA NOS. 405 & 406/AGRA/2012 ABOVE. THE FACTS OF THE CASE, S UBMISSIONS OF THE PARTIES AND FINDINGS OF THE LD. CIT(A) ARE SAME AS HAVE ALREADY BEEN CONSIDERED IN THE CASE OF M/S. VACMET PACKAGINGS (INDIA) PVT. LTD. (SUPRA). I N THIS CASE ALSO, ON THE SAME DAY SEARCH AND SURVEY OPERATION WAS CARRIED OUT. TH E STATEMENT OF SHRI ASEEM GUPTA, CA WAS RECORDED. SIMILAR BLACK DIARY WAS IMP OUNDED. THE AO ON THE SAME BASIS CONCLUDED THAT SINCE SHRI ASEEM GUPTA, CA HAD ADMITTED THAT HE WAS INDULGED IN PROVIDING ACCOMMODATION ENTRIES AND HE ALSO FURNISHED THE NAMES OF ALL THE BENEFICIARIES AND ACCORDINGLY, THE AO MADE THE ADDITION ON ACCOUNT OF SHARE CAPITAL RECEIVED FROM THE FOLLOWING PERSONS : ITA NO. 404, 406 & 404/AGRA/2012 53 S.NO. NAME OF COMPANY WHO HAVE GIVEN ENTRY NAME OF COMPANY WHO HAVE TAKEN ENTRY PERIOD (A.Y.) AMOUNT OF ACCOMMODATION ENTRY 1. M/S.MODERATE CREDIT CORPORATION LTD., DELHI M/S.VACMET FINANCE & INVESTMENTS LTD., AGRA 2006-07 RS.6 CRORE 2. M/S.RAV NET SOLUTIONS (P) LTD., DELHI M/S.VACMET FINANCE & INVESTMENTS LTD., AGRA 2006-07 RS.2 CRORE 3. M/S.KMC PORTFOLIO (P) LTD., DELHI M/S.VACMET FINANCE & INVESTMENTS LTD., AGRA 2006-07 RS.3.10 CRORE THE ASSESSEE MADE SIMILAR WRITTEN SUBMISSIONS, WHIC H IS INCORPORATED IN THE APPELLATE ORDER AND THE LD. CIT(A) GIVING SAME REAS ONS FOR DECISION DELETED THE ADDITION. THE LD. CIT(A) AS FAR AS THE CONTENTS OF ANNEXURE A-20 (BLACK DIARY) ARE CONCERNED, FOUND THAT THEY DO NOT PERTAIN TO THE AS SESSEE AND ACCORDINGLY, APPEAL OF THE ASSESSEE WAS ALLOWED. 12. BOTH THE PARTIES STATED THAT SINCE THE ISSUE IS SAME AS HAS BEEN CONSIDERED IN THE CASE OF M/S. VACMET PACKAGINGS (INDIA) PVT. LTD . (SUPRA), THEREFORE, FINDINGS IN THAT CASE MAY BE FOLLOWED. THE LD. COUNSEL FOR THE ASSESSEE REFERRED TO ALL THE DOCUMENTS IN THE PAPER BOOK IN RESPECT OF THE THREE COMPANIES IN SUPPORT OF THE CONTENTION THAT THE SHARE APPLICATION MONEY WAS GEN UINE. THE SAME DOCUMENTS FILED IN THE PAPER BOOK ARE APPLICATION FORMS FOR I SSUE OF SHARES, SHARE CERTIFICATES, ITA NO. 404, 406 & 404/AGRA/2012 54 ACKNOWLEDGEMENT OF RETURNS, BALANCE SHEETS, BANK ST ATEMENTS, CONFIRMATIONS OF SHARE APPLICANT COMPANIES, BOARDS RESOLUTION AND I NFORMATION GIVEN TO THE REGISTRAR OF COMPANIES AND FURTHER ALL THE COMPANIE S WHO HAVE APPLIED FOR SHARE CERTIFICATES WERE GIVEN NOTICE U/S. 133(6), WHICH W ERE RESPONDED TO BY ALL THE THREE COMPANIES AND THEY FILED THEIR REPLIES BEFORE THE A O ALONG WITH THEIR CONFIRMATIONS, BANK STATEMENTS, SHARE APPLICATIONS, SHARE CERTIFICATES AND BALANCE SHEETS AND HAVE CONFIRMED GIVING AMOUNT TO THE ASSE SSEE THROUGH BANKING CHANNEL FOR ISSUE OF SHARE CAPITAL. THE LD. DR IN ADDITION TO THE ARGUMENTS ALREADY MADE ALSO REFERRED TO THE BANK STATEMENT TO SHOW THAT SO METIMES CHEQUES WERE RETURNED BECAUSE TIME DID NOT MATCH AND THEREAFTER CHEQUES W ERE ISSUED TO THE ASSESSEE COMPANY. THE LD. DR ALSO RELIED UPON 26 TAXMAN.COM 235. APART FROM THE ABOVE SUBMISSIONS ON MERITS, THE LD. COUNSEL FOR THE ASSE SSEE ALSO SUBMITTED THAT IN THE ASSESSMENT YEAR UNDER APPEAL 2006-07, THE AO MADE T HE ASSESSMENT U/S. 153A OF THE IT ACT ON 30.12.2011 BECAUSE THE SEARCH WAS CON DUCTED ON 26.03.2010 AND ON THE IDENTICAL ISSUE PRIOR TO ASSESSMENT ORDER PASSE D U/S. 153A OF THE IT ACT, THE AO SCRUTINIZED ORIGINAL RETURN OF THE ASSESSEE FOR THE SAME ASSESSMENT YEAR 2006-07 AND PASSED THE REGULAR ASSESSMENT ORDER U/S. 143(3) ON DATED 29.12.2008 AND AFTER MAKING DUE ENQUIRIES WITH REGARD TO SHARE CAPITAL A MOUNT, ACCEPTED THE CLAIM OF THE ASSESSEE. IN SUPPORT OF HIS CONTENTION, HE HAS REFERRED TO PB-69, WHICH IS THE STATEMENT OF SHRI R.K. RAJ OF M/S. RAV NET SOLUTIO NS PVT. LTD., DELHI, RECORDED BY ITA NO. 404, 406 & 404/AGRA/2012 55 THE AO AT THE ORIGINAL ASSESSMENT STAGE ON 14.12.20 08, IN WHICH HE HAS CONFIRMED OF MAKING INVESTMENT OF RS.2.00 CRORES IN THE ASSES SEE COMPANY OUT OF THEIR OWN SOURCES THROUGH BANKING CHANNEL. HE HAS ALSO REFERR ED TO THE STATEMENT OF SHRI SANJAY VARSHNEY, DIRECTOR OF MODERATE CREDIT CORPOR ATION LTD. WHICH WAS ALSO RECORDED ON 14.12.2008 BY THE AO AT THE ORIGINAL AS SESSMENT STAGE IN WHICH HE HAS CONFIRMED OF INVESTING RS.6.00 CRORES IN THE ASSESS EE-COMPANY FOR ISSUE OF SHARES OUT OF THEIR OWN SOURCE AND CONFIRMED GIVING THE AM OUNT TO THE ASSESSEE, COPY OF WHICH IS FILED AT PAGE 83 OF THE PAPER BOOK. THE LD . COUNSEL FOR THE ASSESSEE, THEREFORE, SUBMITTED THAT SINCE THE ISSUE OF SHARE CAPITAL HAS ALREADY BEEN CONSIDERED AND DECIDED ON MERIT BY THE AO IN THE RE GULAR PROCEEDINGS U/S. 143(3) ON 29.12.2008 PRIOR TO SEARCH IN QUESTION, THEREFOR E, THE SIMILAR ADDITION SHOULD NOT HAVE BEEN MADE IN THE CASE OF THE ASSESSEE IN THE P ROCEEDINGS U/S. 153A OF THE IT ACT. 13. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND TH E MATERIAL ON RECORD AND DO NOT FIND ANY JUSTIFICATION TO INTERFERE WITH THE FI NDINGS OF THE LD. CIT(A) IN DELETING THE ADDITION UNDER CHALLENGE. ON EXAMINATION OF FAC TS AND EVIDENCE ON RECORD, WE FIND THAT THE ISSUE IS SAME AS IS CONSIDERED IN THE CASE OF M/S. VACMET PACKAGINGS (INDIA) PVT. LTD. (SUPRA), IN WHICH WE HAVE DISMISS ED THE DEPARTMENTAL APPEALS IN ITO NOS. 405 & 406/AGRA/2012. SINCE THE ISSUE IS ID ENTICAL, WHICH IS ALSO ADMITTED ITA NO. 404, 406 & 404/AGRA/2012 56 BY BOTH THE PARTIES, THEREFORE, BY FOLLOWING THE RE ASONS FOR DECISION IN THE CASE OF M/S. VACMET PACKAGINGS (INDIA) PVT. LTD. (SUPRA), W E DISMISS THE DEPARTMENTAL APPEAL. 13.1 APART FROM THE ABOVE ISSUE ON MERIT, WE FIND I NTERESTING POINT RAISED BY THE LD. COUNSEL FOR THE ASSESSEE IN THIS CASE THAT THIS ISSUE IS ALREADY DEALT WITH BY THE AO IN PROCEEDINGS U/S. 143(3) IN THE SAME ASSESSMEN T YEAR PRIOR TO CONDUCT OF THE SEARCH. THE LD. CIT(A) ALSO HELD THAT THE DIARY IN QUESTION DID NOT PERTAIN TO THE ASSESSEE. THEREFORE, NO INCRIMINATING MATERIAL IS L EFT AGAINST THE ASSESSEE FOR CONSIDERATION. STATEMENT OF ASEEM GUPTA COULD NOT B E CONSIDERED TO BE RELEVANT BECAUSE THE ASSESSEE WAS NOT GIVEN ANY OPPORTUNITY OF BEING HEARD AT THE ASSESSMENT STAGE. THE LD. COUNSEL FOR THE ASSESSEE IN SUPPORT OF HIS CONTENTION THAT THE SIMILAR ISSUE OF SHARE CAPITAL HAS BEEN CONSIDE RED BY THE AO PRIOR TO SEARCH IN THE REGULAR ASSESSMENT ORDER DATED 29.12.2008 IN TH E CASE OF SAME ASSESSEE IN THE SAME ASSESSMENT YEAR IS SUPPORTED BY THE STATEMENT RECORDED OF SHRI R.K. RAJ OF M/S. RAV NET SOLUTIONS PVT. LTD. DELHI AND SHRI SAN JAY VARSHNEY OF M/S. MODERATE CREDIT CORPORATION LTD. DELHI ON 14.12.200 8. COPIES OF THEIR STATEMENTS RECORDED AT THE ORIGINAL ASSESSMENT STAGE ARE FILED IN THE PAPER BOOK. IT WOULD, THEREFORE, CLEARLY ESTABLISH THAT PRIOR TO SEARCH, SIMILAR ISSUE WAS CONSIDERED ON MERITS IN THE REGULAR ASSESSMENT PROCEEDINGS U/S. 1 43(3) AND THE AO ACCEPTED THE ITA NO. 404, 406 & 404/AGRA/2012 57 RETURNED INCOME OF THE ASSESSEE VIDE ORDER DATED 29 .12.2008 U/S. 143(3). EXCEPT BLACK DIARY, WHICH WAS ALSO RECOVERED FROM SHRI ASE EM GUPTA, NO OTHER INCRIMINATING MATERIAL WAS FOUND AGAINST THE ASSESS EE. ACCORDING TO THE LD. CIT(A) SAID DIARY DID NOT PERTAIN TO THE ASSESSEE. SECTION 153A OF THE ACT PROVIDES AS UNDER : 153A. (1)] NOTWITHSTANDING ANYTHING CONTAINED IN SECTION 139, SECTION 147, SECTION 148, SECTION 149, SECTION 151 AND SECTION 153, IN THE CASE OF A PERSON WHERE A SEARCH IS INITIATED UN DER SECTION 132 OR BOOKS OF ACCOUNT, OTHER DOCUMENTS OR ANY ASSETS ARE REQUISITIONED UNDER SECTION 132A AFTER THE 31ST DAY OF MAY, 2003, THE ASSESSING OFFICER SHALL (A) ISSUE NOTICE TO SUCH PERSON REQUIRING HIM TO F URNISH WITHIN SUCH PERIOD, AS MAY BE SPECIFIED IN THE NOTICE, THE RETU RN OF INCOME IN RESPECT OF EACH ASSESSMENT YEAR FALLING WITHIN SIX ASSESSMENT YEARS REFERRED TO IN CLAUSE (B), IN THE PRESCRIBED FORM A ND VERIFIED IN THE PRESCRIBED MANNER AND SETTING FORTH SUCH OTHER PART ICULARS AS MAY BE PRESCRIBED AND THE PROVISIONS OF THIS ACT SHALL, SO FAR AS MAY BE, APPLY ACCORDINGLY AS IF SUCH RETURN WERE A RETURN REQUIRE D TO BE FURNISHED UNDER SECTION 139; (B) ASSESS OR REASSESS THE TOTAL INCOME OF SIX ASS ESSMENT YEARS IMMEDIATELY PRECEDING THE ASSESSMENT YEAR RELEVANT TO THE PREVIOUS YEAR IN WHICH SUCH SEARCH IS CONDUCTED OR REQUISITI ON IS MADE : PROVIDED THAT THE ASSESSING OFFICER SHALL ASSESS OR REASSESS THE TOTAL INCOME IN RESPECT OF EACH ASSESSMENT YEAR FALLING W ITHIN SUCH SIX ASSESSMENT YEARS: PROVIDED FURTHER THAT ASSESSMENT OR REASSESSMENT, IF ANY, RELATING T O ANY ASSESSMENT YEAR FALLING WITHIN THE PERIOD OF SI X ASSESSMENT YEARS REFERRED TO IN THIS SUB-SECTION PENDING ON THE DATE OF INITIATION OF THE SEARCH UNDER SECTION 132 OR MAKING OF REQUISITION U NDER SECTION 132A, AS THE CASE MAY BE, SHALL ABATE : ITA NO. 404, 406 & 404/AGRA/2012 58 PROVIDED ALSO THAT THE CENTRAL GOVERNMENT MAY BY RULES MADE BY I T AND PUBLISHED IN THE OFFICIAL GAZETTE (EXCEPT IN CA SES WHERE ANY ASSESSMENT OR REASSESSMENT HAS ABATED UNDER THE SEC OND PROVISO), SPECIFY THE CLASS OR CLASSES OF CASES IN WHICH THE ASSESSING OFFICER SHALL NOT BE REQUIRED TO ISSUE NOTICE FOR ASSESSING OR REASSESSING THE TOTAL INCOME FOR SIX ASSESSMENT YEARS IMMEDIATELY P RECEDING THE ASSESSMENT YEAR RELEVANT TO THE PREVIOUS YEAR IN WH ICH SEARCH IS CONDUCTED OR REQUISITION IS MADE. ] (2) IF ANY PROCEEDING INITIATED OR ANY ORDER OF ASS ESSMENT OR REASSESSMENT MADE UNDER SUB-SECTION (1) HAS BEEN AN NULLED IN APPEAL OR ANY OTHER LEGAL PROCEEDING, THEN, NOTWITHSTANDIN G ANYTHING CONTAINED IN SUB-SECTION (1) OR SECTION 153, THE AS SESSMENT OR REASSESSMENT RELATING TO ANY ASSESSMENT YEAR WHICH HAS ABATED UNDER THE SECOND PROVISO TO SUB-SECTION (1), SHALL STAND REVIVED WITH EFFECT FROM THE DATE OF RECEIPT OF THE ORDER OF SUCH ANNUL MENT BY THE COMMISSIONER: PROVIDED THAT SUCH REVIVAL SHALL CEASE TO HAVE EFFECT, IF S UCH ORDER OF ANNULMENT IS SET ASIDE.] EXPLANATION.FOR THE REMOVAL OF DOUBTS, IT IS HEREB Y DECLARED THAT, (I) SAVE AS OTHERWISE PROVIDED IN THIS SECTION, S ECTION 153B AND SECTION 153C, ALL OTHER PROVISIONS OF THIS ACT SHAL L APPLY TO THE ASSESSMENT MADE UNDER THIS SECTION; (II) IN AN ASSESSMENT OR REASSESSMENT MADE IN RESP ECT OF AN ASSESSMENT YEAR UNDER THIS SECTION, THE TAX SHALL B E CHARGEABLE AT THE RATE OR RATES AS APPLICABLE TO SUCH ASSESSMENT YEAR . 13.2. ITAT, MUMBAI SPECIAL BENCH IN THE CASE OF ALL CARGO GLOBAL LOGISTICS LTD. VS. DY. CIT 137 ITD 287 (SB) CONSIDERED THE FOLLOWI NG TWO QUESTIONS : 1. WHETHER, ON THE FACTS AND IN LAW, THE SCOPE OF ASSESSMENT U/S. 153A ENCOMPASSES ADDITIONS, NOT BASED ON ANY I NCRIMINATING MATERIAL FOUND DURING THE COURSE OF SEARCH ? ITA NO. 404, 406 & 404/AGRA/2012 59 2. WHETHER, ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(APPEALS) WAS JUSTIFIED IN UPHOLDING THE DISALLOWANCE OF DEDUCTION U/S. 80-IA(4) OF THE ACT, ON MERITS ? THE SPECIAL BENCH IN PARA 53, HELD AS UNDER : THE QUESTION NOW IS WHAT IS THE SCOPE OF ASSESSME NT OR REASSESSMENT OF TOTAL INCOME U/S. 153A(1)(B) AND TH E FIRST PROVISO ? WE ARE OF THE VIEW THAT FOR ANSWERING THIS QUESTION , GUIDANCE WILL HAVE TO BE SOUGHT FROM SECTION 132(1). IF ANY BOOKS OF ACCOUNT OR OTHER DOCUMENTS RELEVANT TO THE ASSESSMENT HAD NOT BEEN PRODUCED IN THE COURSE OF ORIGINAL ASSESSMENT AND FOUND IN THE COURSE OF SEARCH IN OUR HUMBLE OPINION SUCH BOOKS OF ACCOUNT OR OTHER D OCUMENTS HAVE TO BE TAKEN INTO ACCOUNT WHILE MAKING ASSESSMENT OR RE ASSESSMENT OF TOTAL INCOME UNDER THE AFORESAID PROVISION. SIMILAR POSITION WILL OBTAIN IN A CASE WHERE UNDISCLOSED INCOME OR UNDISC LOSED PROPERTY HAS BEEN FOUND AS A CONSEQUENCE OF SEARCH. IN OTHER WORDS, HARMONIOUS INTERPRETATION WILL PRODUCE THE FOLLOWIN G RESULTS :- (A) INSOFAR AS PENDING ASSESSMENTS ARE CONCERNED, THE J URISDICTION TO MAKE ORIGINAL ASSESSMENT AND ASSESSMENT U/S. 153 A MERGE INTO ONE AND ONLY ONE ASSESSMENT FOR EACH ASSESSMEN T YEAR SHALL BE MADE SEPARATELY ON THE BASIS OF THE FINDIN GS OF THE SEARCH AND ANY OTHER MATERIAL EXISTING OR BROUGHT O N THE RECORD OF THE AO, (B) IN RESPECT OF NON-ABATED ASSESSMENTS, THE ASSESSMEN T WILL BE MADE ON THE BASIS OF BOOKS OF ACCOUNT OR OTHER DOCU MENTS NOT PRODUCED IN THE COURSE OF ORIGINAL ASSESSMENT BUT F OUND IN THE COURSE OF SEARCH, AND UNDISCLOSED INCOME OR UNDISCL OSED PROPERTY DISCOVERED IN THE COURSE OF SEARCH. ULTIMATELY, THE SPECIAL BENCH ANSWERED THE QUESTION AS UNDER : THUS, THE QUESTION RAISED BEFORE THE SPECIAL BENCH NO.1 IS ANSWERED AS UNDER : ITA NO. 404, 406 & 404/AGRA/2012 60 (A). IN ASSESSMENT THAT ARE ABATED, THE ASSESSING O FFICER RETAINS THE ORIGINAL JURISDICTION AS WELL AS JURISD ICTION CONFERRED ON HIM UNDER SECTION 153A FOR WHICH ASSES SMENTS SHALL BE MADE FOR EACH OF THE SIX ASSESSMENT YEARS SEPARATELY; (B) IN OTHER CASES, IN ADDITION TO THE INCOME THAT HAS ALREADY BEEN ASSESSED, THE ASSESSMENT UNDER SECTION 153A WI LL BE MADE ON THE BASIS OF INCRIMINATING MATERIAL, WHICH IN TH E CONTEXT OF RELEVANT PROVISIONS MEANS BOOKS OF ACCOUNT, OTHER DOCUMENTS, FOUND IN THE COURSE OF SEARCH BUT NOT PRODUCED IN T HE COURSE OF ORIGINAL ASSESSMENT, AND UNDISCLOSED INCOME OR PROP ERTY DISCOVERED IN THE COURSE OF SEARCH. THE ABOVE DECISION OF SPECIAL BENCH SQUARELY APPLIE S IN FAVOUR OF THE ASSESSEE BECAUSE IN THE CASE OF THE ASSESSEE IN THE SAME ASS ESSMENT YEAR UNDER APPEAL 2006- 07, PRIOR TO SEARCH, THE REGULAR ASSESSMENT ORDER W AS PASSED ON 29.12.2008 U/S. 143(3) AND ON THE SIMILAR ISSUE, THE AO AFTER CONDU CTING DUE ENQUIRIES AND RECORDING THE STATEMENT OF TWO CONCERNED PERSONS OF THE SHARE APPLICANTS, ACCEPTED THE CLAIM OF THE ASSESSEE OF GENUINE SHARE CAPITAL INVESTED BY THE THREE COMPANIES. THEREFORE, NO ASSESSMENT OR REASSESSMENT PROCEEDING S FOR THE BLOCK PERIOD WERE PENDING ON THE DATE OF INITIATION OF SEARCH AND AS SUCH THOSE ASSESSMENTS COULD NOT BE TREATED TO HAVE ABATED. SINCE THE ISSUE IS ALREA DY CONSIDERED IN THE REGULAR ASSESSMENT PRIOR TO THE SEARCH ON THE BASIS OF BOOK S OF ACCOUNT AND NO INCRIMINATING MATERIAL WAS FOUND DURING THE COURSE OF SEARCH, THEREFORE, ON THE ISSUE OF SHARE CAPITAL, NO ADDITION COULD BE MADE A GAINST THE ASSESSEE AS PER ITA NO. 404, 406 & 404/AGRA/2012 61 DECISION OF SPECIAL BENCH IN THE CASE OF ALL CARGO GLOBAL LOGISTICS LTD. VS. DCIT(SUPRA). FOLLOWING THE DECISION OF SPECIAL BENC H ALSO, WE DO NOT FIND ANY JUSTIFICATION TO INTERFERE WITH THE ORDER OF THE LD . CIT(A) IN DELETING THE ADDITION. IN THE RESULT, THE DEPARTMENTAL APPEAL IN ITA NO. 404/ AGRA/2012 FAILS AND IS DISMISSED. 14. IN THE RESULT, ALL THE DEPARTMENTAL APPEALS ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT. SD/- SD/- (A.L. GEHLOT) (BHAVNESH SAINI) ACCOUNTANT MEMBER JUDICIAL MEMBER *AKS/- COPY OF THE ORDER FORWARDED TO : 1. APPELLANT 2. RESPONDENT 3. CIT(A), CONCERNED BY ORDER 4. CIT, CONCERNED 5. DR, ITAT, AGRA 6. GUARD FILE SR. 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